Barker Corp.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 Barker'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 can be calculated using the Capital Asset Pricing Model (CAPM):
Required rate of return = real risk-free rate + (beta x market risk premium) + inflation premium
= 2.00% + (1.10 x 4.70%) + 3.00%
= 10.17%
Therefore, the correct answer is D, 10.17%.