Question: Some information for Kleinfelds Fine Clothes is shown below. Suppose Kleinfelds acquires some risky assets that cause its beta to increase by 15.0%. In addition,

Some information for Kleinfelds Fine Clothes is shown below. Suppose Kleinfelds acquires some risky assets that cause its beta to increase by 15.0%. In addition, expected inflation increases by 1.10%. What is the stock's new required rate of return?

Initial beta

1.00

Initial required return (rs)

10.20%

Market risk premium, RPM

6.00%

Percentage increase in beta

15.00%

Increase in inflation premium, IP

1.10%

a. 10.13%

b. 12.20%

c. 14.03%

d. 13.18%

e. 9.64%

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