Solved: Risk-free rate and the beta remain unchanged, Finance Basics

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Risk-free rate and the beta remain unchanged

Question: A stock has a required return of 11%; the risk-free rate is 7%; and the market risk premium is 4%.

Q1. What is the stock's beta?

Q2. If the market risk premium increased to 6%, what would happen to the stock's required rate of return? Assume the risk-free rate and the beta remain unchanged.

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Finance Basics: Risk-free rate and the beta remain unchanged

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Finance Basics: Risk-free rate and the beta remain unchanged

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