Question: If in problem 2 the beta (b) were 1.9 and the other values remained the same, what is the new value of Ke? What is

If in problem 2 the beta (b) were 1.9 and the other values remained the same, what is the new value of Ke? What is the relationship between a higher beta and the required rate of return (Ke)?

Problem 2

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

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