A stock has a required return of 16%, the risk-free rate is 5%,
and the market risk premium is 3%.
- What is the stock's beta? Round your answer to two decimal
places.
- If the market risk premium increased to 10%, what would happen
to the stock's required rate of return? Assume that the risk-free
rate and the beta remain unchanged. Do not round intermediate
calculations. Round your answer to two decimal places.
- If the stock's beta is greater than 1.0, then the change in
required rate of return will be less than the change in the market
risk premium.
- If the stock's beta is equal to 1.0, then the change in
required rate of return will be greater than the change in the
market risk premium.
- If the stock's beta is equal to 1.0, then the change in
required rate of return will be less than the change in the market
risk premium.
- If the stock's beta is greater than 1.0, then the change in
required rate of return will be greater than the change in the
market risk premium.
- If the stock's beta is less than 1.0, then the change in
required rate of return will be greater than the change in the
market risk premium.
New stock's required rate of return will
be %.