8.4 BETA AND REQUIRED RATE OF RETURN A stock has a required return of 12%,...
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8.4 BETA AND REQUIRED RATE OF RETURN A stock has a required return of 12%, the risk-free rate is 4.5%, and the market risk premium is 5%. 1. What is the stock's beta? 1. If the market risk premium increased to 6%, what would happen to the stock's required rate of return? Assume that the risk-free rate and the beta remain unchanged. 8.6 CAPM AND REQUIRED RETURN Manufacturing Company has a beta of.3, and Software Industries has a beta of 1.2. The required return on an index fund that holds the entire stock market is 14.0%. The risk-free rate of interest is 4.5%. By how much does Software's required return exceed Manufacturing's required return? Hint: An index fund will have a beta of 1.0. Given: rmis 13.0% and the risk-free rate is 4.5%. Hint: Calculate the market risk premium, rm - RF
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