Suppose That (1) Investors Expect a 4

Multiple Choice

Suppose that (1) investors expect a 4.0% rate of inflation in the future, (2) the real risk-free rate is 3.0%, (3) the market risk premium is 5.0%, (4) Talcott Inc.'s beta is 1.00, and (5) its realized rate of return has averaged 15.0% over the last 5 years.Calculate the required rate of return for Talcot Inc.

A) 10.29%
B) 10.83%
C) 11.40%
D) 12.00%
E) 12.60%