A certain stock has a beta $($B$)$ of $1\mathrm{.}5.$ At this time, the risk$-$free rate $($Rf$)$ is $3\%,$ and the expected return on the market portfolio $($Rm$)$ is $10\%.$ You believe this stock will return $($R$)11\%$ return next year.

a$.$ If the return on the market portfolio were to increase by $10\%,$ what would you expect to happen to the stock$$s return? What if the market return were to decline by $10\%?$

b$.$ Use the Capital Asset Pricing Model $($CAPM$)$ to find the required return on this

stock.

c$.$ Given you answer to part $($b$),$ would you recommend this stock? Why or why not?

d$.$ Assume that as result of investors becoming less risk averse, the market return drops to $7\%,$ but the risk$-$free rate remains at $3\%.$ What effect would this change have on your responses to part $($b$)$ and part $($c$)?$