How do you get these answers? 3) Calculate the required rate of return for CC Co

Question

How do you get these answers?

3) Calculate the required rate of return for CC Company assuming that the Investors expect the stock market to return 11% and Treasury Bills to earn 3%. Company CC has a beta of 0.7. Required rate of return = _____8.6% _______________

4) BB company has a beta of 1.6, ZZ company has a beta of 0.9. The market risk premium is 7.3%. The current risk-free rate is 3.2%. By how much does BB company’s required return exceed ZZ company’s required return? BB’s required return is ___5.11% ____________% more than ZZ’s required return.

Explanation / Answer

Required rate of return = 3%+0.7*(11%-3%)=8.60%

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