The stock of Pizza Hot, Inc., a Mexican pizza chain, has an estimated beta of 1.5. Calculate

Question:

The stock of Pizza Hot, Inc., a Mexican pizza chain, has an estimated beta of 1.5. Calculate the required rate of return on Pizza Hot’s stock if the SML is estimated as follows:
kj = 0.06 + 0.094βj
Based on
a. An initial inflation expectation of 4 percent
b. A new inflation expectation of 6 percent