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File Edit View History Bookmarks People Window Help MindTap-Cengage Learning × ngage Secure https://ng.cengage.com/static/nb/uijindex.htmi?nbld-824599&nbNodeld-317517035;&elsBN-978130; kboard Learn M Gmail Apple Cloud? Cengage FIN 331 fFacebook TwitterY YahoolNews mework, part 1-Graded t 9 AM CDT nt: Chapter 8 Homework, part 1-Graded Problem 8.04 O Click here to read the eBook: Stand-Alone Risk EXPECTED AND REQUIRED RATES OF RETURN Assume that the risk-free rate is 2.5% and the market risk premium is 4%. a. What is the required return for the overall stock market? Round your answer to two decimal places. O b. What is the required rate of return on a stock with a beta of 1.4? Round your answer to two decimal places.

Explanation / Answer

a. expected return = 2.5% + 4% = 6.5%

b. required return = 2.5% + 1.4*4% = 8.10%

2

a. beta = (13-5.5)/6 = 1.25

b. option IV

max of 4 subsections to be answered

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