Parr Paper's stock has a beta of 1.40, and its required return is 13.00%. Clover Dairy's stock has a beta of 0.80. If the risk-free rate is 4.00%, what is the required rate of return on Clover's stock? (Hint: First find the market risk premium.)
8.55%
8.71%
8.99%
9.14%
9.33%
The market risk premium is 13.00% - 4.00% = 9%, correct?
So according to the only equation I seem to find anywhere, I am getting:
4 + .80 (9 - 4) = 8
Can anyone clue me in on what I'm missing here? Thanks in advance.
Flora
8.55%
8.71%
8.99%
9.14%
9.33%
The market risk premium is 13.00% - 4.00% = 9%, correct?
So according to the only equation I seem to find anywhere, I am getting:
4 + .80 (9 - 4) = 8
Can anyone clue me in on what I'm missing here? Thanks in advance.
Flora