Question: 3. Problem 8.05 Click here to read the eBook: The Relationship between Risk and Rates of Return BETA AND REQUIRED RATE OF RETURN A stock

3. Problem 8.05 Click here to read the eBook: The Relationship between Risk and Rates of Return BETA AND REQUIRED RATE OF RETURN A stock has a required return of 11%; the risk-free rate is 45% and the market risk premium is a. What is the stock's Detay Round your answer to two decimal places 2.6 b. If the market risk premium Increased to 10%, what would happen to the stock's required rate of retum? Assume that the risk-free rate and the beta remain unchanged. 1. If the stocks bota is greater than 10, then the change in required rate of retum will be less than the change in the market is premium II. If the stocks but is equal to 10, then the change in required rate of return will be greater than the change in the market risk premium III. If the stock's beta is equal to 1.0, then the change in regulred rate of return will be less than the change in the market ilsk premium TV. If the stock's beta is greater than to, then the change in required rate of retum w be greater than the change in the market premium 1. If the stock Detais less than 10, then the change in required rate of retum will be greater than the change in the market iisk premium New stock's required rate of return will be 9. Round your answer to two decimal places

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