A stock has a required return of 11%, the risk-free rate is 7%, and the market risk premium is 3%. What is the stock's beta? Round your answer to two decimal places. If the market risk premium increased to 7%, what would happen to the stock's required rate of return? Assume that the risk-free rate and the beta remain unchanged. Do not round intermediate calculations. Round your answer to two decimal places. If the stock's beta is equal to 1.0, then the change in required rate of return will be greater than the change in the market risk premium. If the stock's beta is equal to 1.0, then the change in required rate of return will be less than the change in the market risk premium. If the stock's beta is greater than 1.0, then the change in required rate of return will be greater than the change in the market risk premium. If the stock's beta is less than 1.0, then the change in required rate of return will be greater than the change in the market risk premium. If the stock's beta is greater than 1.0, then the change in required rate of return will be less than the change in the market risk premium. -Select-IIIIIIIVVItem 2 New stock's required rate of return will be   %.

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Risk and return

Before understanding the concept of Risk and Return in Financial Management, understanding the two-concept Risk and return individually is necessary. 

Capital Asset Pricing Model

Capital asset pricing model, also known as CAPM, shows the relationship between the expected return of the investment and the market at risk. This concept is basically used particularly in the case of stocks or shares. It is also used across finance for pricing assets that have higher risk identity and for evaluating the expected returns for the assets given the risk of those assets and also the cost of capital.