Assume that Verizon's stock has a required return of 10.75%, a beta of 1.85, and is in equilibrium. If the risk-fre...

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Assume that Verizons stock has a required return of 10.75%, a beta of 1.85, and is in equilibrium. If the risk-free rate is

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Answer 1

Answer #1

Required return = risk free rate + (beta * (market return - risk free rate))

10.75% = 2.35% + (1.85 * (market return - 2.35%))

market return = 6.89%.

market risk premium = market return - risk free rate

market risk premium =6.89% - 2.35%

market risk premium = 4.54%

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Answer 2

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