Problem #$2,$

If Rf $=8\%,$ b$=1\mathrm{.}3$ and the ERP $=6\mathrm{.}5$ percent compute Ke $($the required rate of return.

Problem #$3$

If in problem $2$ the beta $($b$)$ were $1\mathrm{.}9$ and the other values remailed the same, what is the new Ke$?$ What is the relationship between a higher beta and the required rate of return $($Ke$)?$