Problem 8-4 Expected and required rates of return Assume that the risk-free rate is 6% and...

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Problem 8-4 Expected and required rates of return Assume that the risk-free rate is 6% and the market risk premium is 6%. a.

business finance

Answer 1

Answer #1

market risk premium=market rate-risk free rate

a.market rate=(6+6)=12%

b.Required return=risk free rate+beta*(market rate-risk free rate)

=6+2.4*(12-6)

=20.4%

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Answer 2

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