Given the following information, what is the required rate of return on Bin Co? - inflation premium = 3%
- real risk-free rate = 2%
- Bin Co. beta = 1.3
- market risk premium = 4%
Use the capital asset pricing model (CAPM) to find the required rate of return. The approximate risk-free rate of interest is 5% (2% real risk-free rate + 3% inflation premium).k = 5% + 1.3(4%) = 10.2%.
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