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frozen [14]
3 years ago
12

A stock has a required return of 11%; the risk-free rate is 7%; and the market risk premium is 4%.

Business
1 answer:
kotegsom [21]3 years ago
6 0

Answer:

The Beta is 1

The required return increases to 13%

Explanation:

The formula for required return is given below:

Required Return = Risk-Free Rate of Return + β(Market Return – Risk-Free Rate of Return)

required return is 11%

risk-free rate of return=7%

Beta is unknown

market return-risk free rate of return is market risk premium is 4%

11%=7%+beta(4%)

11%-7%=beta*4%

4%=beta*4%

beta=4%/4%

beta=1

If the market risk premium increased to 6%,required return is calculated thus:

required return=7%+1(6%)

required return =13%

This implies that the riskier the stock, the higher the market risk premium, the higher the required return to investors.

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7 0
3 years ago
A citizen in a developing country with a currency policy of convertibility on the current account could engage in all of the fol
masha68 [24]

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Explanation:

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3 0
3 years ago
Extrinsic motivation is defined as ________. the pursuit of an activity for external reward the pursuit of an activity for its o
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6 0
3 years ago
Capital structure decisions include determining: Group of answer choices The terms of a bond issue to fund a project. the amount
IgorC [24]

Answer:

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Explanation:

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5 0
3 years ago
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Ilya [14]

Answer:

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