Computing new required return

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Reference no: EM1373129

Adriatic Company's stock had a required return of 11.50 percent last year, when the risk-free rate was 5.50% and the market risk premium was 4.75%. Now suppose there is a shift in investor risk aversion, and the market risk premium increases by 2 percent. The risk-free rate and Adriatic's beta remain unchanged. What is Adriatic's new required return? [Hint: First compute the beta then find the required return.]

Reference no: EM1373129

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