Problem:
Required Rate of Return
Assume that the risk-free rate is 6% and that the market risk premium is 5%.
Answer the following question:
Question 1: What is the required rate of return on a stock with a beta of 0.8?
Question 2: What is the required rate of return on a stock with a beta of 2.5?
Question 3: What is the required return on the market?
Please provide all calculations and formulas.