Part 1: ABC Inc.’s stock

Part 1: ABC Inc.’s stock

Part 1: ABC Inc.’s stock has a 25% chance of producing a 10% return, a 50% chance of producing a 15% return, and a 25% chance of producing a -2% return. What is the firm’s expected rate of return.Part 2: Calculate the required rate of return for ABC Inc., assuming that (1) the risk-free rate is 5.0%, (2) expected market return is 11% and (3) the firm has a beta of 1.50 (Hint: You need to find out market risk premium first)

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