No change in market risk premium

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Reference no: EM13924668

Suppose the risk-free rate is 9%, the rate of market return is 14%, and the beta for stock A is 1.3.

a. What is the required return on stock A?

b. Now suppose that the risk-free rate increases to 10%, the slope of the SML remains constant (no change in market risk premium). How would this affect market return and the required return on stock A?

c. Now assume that the risk-free rate remains at 9%, but market return increase to 16%. How would these changes affect the required return on stock A?

Reference no: EM13924668

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