Question
Data for XYZ Corporation is shown below. Now XYZ acquires some risky assets that cause its beta to increase by 30%. In addition, expected inflation
Data for XYZ Corporation is shown below. Now XYZ acquires some risky assets that cause its beta to increase by 30%. In addition, expected inflation increases by 2.00%. What is the stock's new required rate of return? Hint: Use the Capital Asset Pricing model equation. Briefly discuss.
Initial Beta 1.00 Initial required return (rs) 10.20% The market risk premium, RPM 6.00% Percentage increase in beta 30.00% Increase in inflation premium, IP 2.00%
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Money Banking And Financial Markets
Authors: Stephen Cecchetti, Kermit Schoenholtz
3rd Edition
007337590X, 9780073375908
