Suppose the market return is 8%, the risk-free rate is 1% and the beta for a given stock is 1.2. Answer the following questions based on this information:
a) What is the required return for this stock?
b) If the beta increases by 50% (but beta remains at 1.2), what will be the new required return for the stock? What is the percentage-wise change in required return compared to your answer to A) above?
c) If the market return increases by 50% (but beta remains at 1.2), what will be the new required return for the stock? What is the percentage-wise change in required return compared to your answer to A) above?