Stock a's stock has a beta of 1.30, and its required return is 13.75%. stock b's beta is 0.80. if the risk-free rate is 2.75%, what is the required rate of return on b's stock? (hint: first find the market risk premium.) do not round your intermediate calculations

a) 9.52%
b) 9.33%
c) 8.57%
d) 11.33%
e) 10.66%

9.52%

Step-by-step explanation:

Required rate = Risk free rate + Beta of stock × market risk premium

Hence for Stock A :

13.75% = 2.75% + 1.30 × market risk premium

0.1375 = 0.0275 + 1.30 × market risk premium

Market risk premium =

Rm =

Rm = 0.084615

Market risk premium =  8.4615%

Hence for Stock B:

Required rate = 2.75% + 0.8 × 8.4615%

                       = 0.0275 + 0.8 × 0.084615

                       = 0.095192

                       = 9.52%

Option a) 9.52% is the answer.

wait this depends wether emily and zach how they are thinking.

yes they are the same.