Problem
Aust Pants, Inc. common stock has a beta of 0.90, while Acme Inc. common stock has a beta of 1.80. The expected return on the market is 10 percent, and the risk-free rate is 6 percent. Market risk premium is 4 percent.
According to the capital-asset pricing model (CAPM) and making use of the information above, what is the required return for Aust Pants' common stock and Acme's common stock?