Consider the Information Below for Postman Builders Inc A) 1400%
B) 14

question 19

Multiple Choice

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? $$\begin{array} { l r } \text { Beta: } & 1.50 \\\text { Required return } \left( \mathrm { r } _ { \mathrm { s } } \right) & 10.20 \% \\\text { RPM: } & 6.00 \% \\\text { Percentage increase in beta: } & 20 \%\end{array}$$

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

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Definitions:

Disposable Income

The sum of funds available to a person or family for spending or saving once income taxes are subtracted.

Consumption

The action or process of using goods and services for personal use or enjoyment within an economy.

APS

Acronym for Average Propensity to Save, which is the proportion of income which is saved, usually expressed as a percentage of total household income.

Disposable Income

The sum available for household consumption and saving after the reduction of income taxes.