1. The return on market portfolio is 12% and the risk-free rate is 5%. If the beta coefficient is 1.4, what is the cost of capital using the capital asset pricing model? 2. Using the information in number 1 and if the beta coefficient increases to 1.6, the required rate of return will increase (decrease) by:

1. The return on market portfolio is 12% and the risk-free rate is 5%. If the beta coefficient is 1.4, what is the cost of capital using the capital asset pricing model? 2. Using the information in number 1 and if the beta coefficient increases to 1.6, the required rate of return will increase (decrease) by:

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter8: Basic Stock Valuation

Section: Chapter Questions

Problem 15MC: Assume that Temp Force has a beta coefficient of 1.2, that the risk-free rate (the yield on T-bonds)...

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