Kollo Enterprises has a beta of 1.10,the real risk-free rate is 2.00%,investors expect a 3.00% future inflation rate,and the market risk premium is 4.70%.What is Kollo's required rate of return?
A)9.43%
B)9.67%
C)9.92%
D)10.17%
E)10.42%

Question

Quizplus · Accepted Answer

The required rate of return is calculated using the CAPM formula: Required Return = Risk-Free Rate + Beta * Market Risk Premium. Here, it is 2.00% + 1.10 * 4.70% = 7.17%. Adding the expected inflation rate of 3.00%, the total required rate of return is 10.17%.

Kollo Enterprises Has a Beta of 1