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5. Green corps required rate of return is 12% and beta is 1.3. What is the required rate of return of Blue corp if its beta
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Required Rate of Return of Green Corp= Risk free rate + Beta * Market risk premium
0.12 = 0.0475 + 1.3 * Market Risk Premium
0.12 – 0.0475 = 1.3 * Market Risk Premium
0.0725 = 1.3 * Market Risk Premium
Market Risk Premium = 0.0725 / 1.3
Market Risk Premium = 0.0558

Required rate of Return of Blue Corp = Risk Free Rate + Beta * Market Risk Premium
Required rate of Return of Blue Corp = 0.0475 + 0.8 * 0.0558
Required rate of Return of Blue Corp = 0.0475 + 0.0446
Required rate of Return of Blue Corp = 0.0921 or 9.21%

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