5. The risk-free rat (R<sub>RF</sub>) is 3%, and the market risk premium (R<sub>M</sub> - R<sub>RF</sub>) is 4%, where R<sub>M</sub> is the rate of return on Stock Market. Stock A has a beta of 1.2. What is the required rate of return on Stock A? 6. Review of the facts about stocks: • Represents ownership • Ownership implies control • Stockholders elect directors • Directors elect management • Management's goal: Maximize the stock price
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