market risk premium=market rate- risk-free rate
1.market rate=(6.5+3)=9.5%
2.required return=risk-free rate +Beta*(market rate- risk-free rate)
=6.5+0.8*(9.5-6.5)
=8.9%
8.4 Assume that the risk-free rate is 6.5% and the market risk premium is 3%. What...
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