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    Find the required rate of return

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    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

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