I haven\'t been able to find the solution to this answer yet.Hopefully someone c

Question

I haven't been able to find the solution to this answer yet.Hopefully someone can explain this to me. Thanks.
Coca-Cola has a beta of 0.82, the real risk-free rate is2.00%, investors expect a 3.00% future inflation rate, and themarket risk premium is 4.70%. What is Coca-Cola's required rate ofreturn?

a. 8.85%
b. 9.56%
c. 9.30%
d. 6.64%
e. 6.73% I haven't been able to find the solution to this answer yet.Hopefully someone can explain this to me. Thanks.
Coca-Cola has a beta of 0.82, the real risk-free rate is2.00%, investors expect a 3.00% future inflation rate, and themarket risk premium is 4.70%. What is Coca-Cola's required rate ofreturn?

a. 8.85%
b. 9.56%
c. 9.30%
d. 6.64%
e. 6.73%

Explanation / Answer

Reqd Rate of Return Ks = Krf + RPm*b where RPm = Risk prem = 4.7% b = beta = 0.82 K* = Real Risk Free rate = 2% IP = Inflation prem = 3% Krf = Risk Free Rate = K*+IP = 2%+3% = 5%
Putting values, we get Ks= 5% + 4.7% *0.82 = 8.85%
So answer is 'a'

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