8 Oakdale Furniture Inc. has a beta coefficient of 0.7 and a required rate of return of 15 percent The market risk premi

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8 Oakdale Furniture Inc Has A Beta Coefficient Of 0 7 And A Required Rate Of Return Of 15 Percent The Market Risk Premi 1 (31.94 KiB) Viewed 46 times

8 Oakdale Furniture Inc. has a beta coefficient of 0.7 and a required rate of return of 15 percent The market risk premium is currently 5 percent. If the inflation premium increases by 2 percentage points, and Oakdale acquires new assets which increase its beta by 100 percent, what will be Oakdale's new required rate of return? a. 13.50% b. 22.80% C. 18.75% d. 20.5% e. 17.009 9 Company X has a beta of 1.6, while Company Y's beta is 0.7. The risk-free rate is 7 percent, and the required rate of return on an average stock is 12 percent. Now the expected rate of inflation built into tu rises by 1 percentage point, the real risk-free rate remains constant, the required return on the market rises to 14 percent, and betas remain constant. After all of these changes have been reflected in the data, by how much will the required return on Stock X exceed that on Stock Y? a. 3.75% b.4.20% с. 4.82% d. 5.40% e. 5.75%