An investment has a beta of 1.0. The risk free rate is 2% and current market return is 8%?

  1. What is the required return?
  2. So, if you were able to guarantee a return of 7% on this investment, should you go forward with the investment?
  3. What is the required return if beta is .8 instead?
  4. So, if you were able to guarantee a return of 7% on this investment, should you go forward with the investment?

Please explain each step – including formulas used