The systematic risk (beta) of France’s L’Occitane Corporation is 1.2 when measured against a world stock market index and 1.4 against a French stock index. The annual risk-free rate in France is 5 percent.

a. If the required return on the world market is 12 percent, what is the required return on L’Occitane stock in an integrated financial market?

b. Suppose the French financial market is segmented from the rest of the world. If the required return on the French market is 11 percent, what is the required return on L’Occitane stock?