need answer in step by step 8-13. If a company's beta increased from 1.5 to 4.5, would its expected rate ofreturn triple? Explain why or why not. (Hint: Assume the risk-free rate is 4 percentand the market risk premium is 5 percent.)

No, there would not be a tripling in the projected rate of return. Because of the greater beta, the…

Answered: 8-13. If a company's beta increased…

EBK CFIN

6th Edition

ISBN:9781337671743

Author:BESLEY

Publisher:BESLEY

Chapter8: Risk And Rates Of Return

Section: Chapter Questions

Problem 15PROB

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8-13. If a company's beta increased from 1.5 to 4.5, would its expected rate of return triple? Explain why or why not. (Hint: Assume the risk-free rate is 4 percent and the market risk premium is 5 percent.)