# Find the required rate of return

2. If RF = 6 percent, b= 1.3, and the ERP = 6.5 percent, compute Ke (the required rate of return).

Ke = RF + b(KM - RF)

where

Ke = Required rate of return

RF = Risk-free rate

b = Beta coefficient

KM = Expected return for common stocks in the market

KM = Expected return for common stocks in the market

(KM - RF) = Equity risk premium (ERP)

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2. If RF = 6 percent, b= 1.3, and the ERP = 6.5 percent, compute Ke (the required ...

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This solution is comprised of a detailed explanation to find the required rate of return.

$2.19