Consider the Information Below for Postman Builders Inc $\quad$

Consider the information below for Postman Builders Inc. Suppose that the expected inflation rate and thus the inflation premium increase by 2.0 percentage points, and Postman acquires risky assets that increase its beta by the indicated percentage. What is the firm's new required rate of return?
beta: $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$$\quad 1.50$
Recquired return $\left( r _ { 5 } \right)$ $\quad$ $\quad$$\quad10.20 \%$
RPM: $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad$ $\quad6.00 \%$
Percentage increase in beta: $\quad 20 \%$

A) 14.00%
B) 14.70%
C) 15.44%
D) 16.21%
E) 17.02%

Correct Answer:

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