Question: 1. a. You work for XYZ Corp., which has a beta of 1.5. The market return is expected to be 8%, and the risk-free rate

a. You work for XYZ Corp., which has a beta of 1.5. The market return is expected to be 8%, and the risk-free rate is 2%. The Fed just announced a policy change that increased the risk-free rate to 3%. How did the increase in the risk-free rate impact your company's cost of equity?

b. XYZ Inc. is expected to pay a dividend of D1 = $1.60 per share at the end of the year, and that dividend is expected to grow at a constant rate of 4.00% per year in the future. The company's beta is 0.9, the market risk premium is 6.50%, and the risk-free rate is 2.00%. What is the company's current stock price?

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