Hello:

I am taking several non-credit courses in Boston University towards Financial Planning certificate.

Question: The risk-free rate is currently 3.5%. Use the following information to determine the required return for XYZ, Inc.?

Risk Factor Coefficient Price of Risk Factor

Time horizon risk 0.90 -0.8%

Confidence risk 1.20 1.2

Business cycle risk 0.75 1.0

Inflation risk 0.85 3.0

A: 6.98%

B: 7.52%

C: 9.25%

D: 10.65%