CAPM: req. rate of return
3. Nantell Corporation’s stock had a required return of 9.75% last year, when the risk-free rate was 3.50% and the market risk premium was 5.00%. Then an increase in investor risk aversion caused the market risk premium to rise by 2% from 5.00% to 7.00%. The risk-free rate and the firm’s beta remain unchanged. What is the company’s new required rate of return?
a. 10.00%
b. 10.66%
c. 11.45%
d. 12.25%
e. 13.00%
