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Turner corp. stocks had a required rate of return of 8%. Risk free rate was 3% and market risk premium was 6 %. Analysts are
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Answer #1

Old Required Return = Risk free rate + Beta * Market Risk Premium

0.08 = 0.03 + Beta * 0.06

0.08 - 0.03 = Beta * 0.06

Beta = 0.05 / 0.06

Beta = 0.83

New Required Return = Risk free rate + Beta * Market Risk Premium

= 0.03 + 0.83 * 0.02

New Required Return = 0.0466 or 4.66% or 5%

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