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required return

A company has a beta of 1.3. The risk free interest rate today is 8% and the return on a market portfolio of stocks is 14%. (Therefore the market risk is 6%, the difference the market return and the risk free return).

I. What is the required return (equity cost) on the company's stock?
II. If the risk free rate rises to 9%, what will the required rate of return on the company's stock?
III. If the beta of this company were 0.8, what would the its required rate of return?

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A company has a beta of 1.3. The risk free interest rate today is 8% and the return on a market portfolio of stocks is 14%. (Therefore the market risk is 6%, ...

Solution Summary

The required return is encompassed.

$2.19