Calculate the new required return

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The Parker Company's stock has a beta of 1.2. The risk-free rate is presently 5 percent and the market risk premium is 4%.

If investors interpret the increase in the risk-free rate to mean tighter money and therefore become pessimistic, the SML will shift.

Calculate the new required return if the slope of the SML is now 0.05.

Reference no: EM131131870

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