Quantitative Problem: You are given the following information for Wine and Cork Enterprises (WCE):
rRF = 3%; rM = 7%; RPM = 4%, and beta = 1
What is WCE's required
%
Review the SML equation to calculate the stock's required return.
Be sure to follow the correct order of mathematical operations.
If inflation increases by 3% but there is no change in investors' risk aversion, what is WCE's required rate of return now? Do not round intermediate calculations. Round your answer to two decimal places.
%
Review the SML equation to calculate the stock's required return.
Be sure to follow the correct order of mathematical operations.
Remember the impact of inflation on the SML equation.
Assume now that there is no change in inflation, but risk aversion increases by 1%. What is WCE's required rate of return now? Do not round intermediate calculations. Round your answer to two decimal places.
%
Review the SML equation to calculate the stock's required return.
Be sure to follow the correct order of mathematical operations.
Remember the impact of risk aversion on the SML equation.
If inflation increases by 3% and risk aversion increases by 1%, what is WCE's required rate of return now? Do not round intermediate calculations. Round your answer to two decimal places.
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