CCC Corp has a beta of 1.5 and is currently in equilibrium. The required rate of return on the stock is 12.00% versus a required return on an average stock of 10.00%. Now the required return on an average stock increases by 30.0% (not percentage points). Neither betas nor the risk-free rate change. What would CCC's new required return be

CCC's new required rate of return is 16.5%

Explanation:

in the first we need to determine the risk free rate using the Capital Asset Pricing Model formula of Miller and Modgiliani as shown below

required return=Rf+beta*(average market return-Rf)

Rf is the risk free rate that is unknown

Beta is 1.5

average market return is 10%

required rate of return is 12%

Rf?

12%=Rf+1.5*(10%-Rf)

12%=Rf+15%-1.5Rf

1.5Rf-Rf=15%-12%

0.5Rf=3%

Rf=3%/0.5

Rf=6%

Average rate of 10% has now increased by 30% i.e 10%*(1+30%)=13%

Required rate of return=6%+1.5*(13%-6%)

                                      =6%+1.5*7%

                                       =6%+10.5%=16.5%

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hi,

henry is an economist and wants to understand the relationship between inflation and consumer spending habits. for his research, he needs the consumer price index for 2014 and the inflation rate. based on the prices of goods given, what will he find to be the cpi and inflation rate for 2014? assume that a consumer’s basket for three consecutive years consists of the following:

you dont privide answer choices.

answer - 15% of a inflatation rate is 15% less in cpi