Yonan Corporation's Stock: Required Return
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Yonan Corporation's stock had a required return of 11.50% last year, when the risk-free rate was 5.50% and the market risk premium was 4.75%. Now suppose there is a shift in investor risk aversion, and the market risk premium increases by 2%. The risk-free rate and Yonan's beta remain unchanged. What is Yonan's new required return?
a. 14.03%
b. 14.38%
c. 14.74%
d. 15.10%
e. 15.48%
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Solution Summary
The expert calculates the required return for Yonan Corporation's stock.
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The answer is A. This is because:
Step 1: What is the equation for the ...
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