An equity analyst has determined that the risk-free rate is 4% and the market risk premium is 6%.
What is the required return for ABC Corporation with a beta of 1.4?
Now assume the risk-free rate (a) increases to 6% and (b) decreases to 3%. How does this impact the required return on the market and the required return for ABC Corporation?
Now assume that risk-free rate remains constant, but the market risk premium (a) increases to 8% and (b) decreases to 4%. How does this impact the required return on the market and the required return for ABC Corporation?