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

question 14

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?
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%

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Definitions:

Thousands of Dollars

A financial notation used to indicate sums of money in thousands, simplifying large numbers for ease of reading and interpretation.

Model Appropriate

Refers to the suitability of a statistical or mathematical model in accurately representing a real-world situation for analytical purposes.

Drop Height

The vertical distance through which an object is dropped or falls, often used in experiments to measure impact or velocity.

Bounce Height

The maximum height reached by an object after being dropped or thrown and rebounding off a surface.