a. If the beta of Puritan stock equals 1.6, the risk-free rate equals 6%, and the expected return on the market portfolio equals 11% then what is its cost of equity.

b. Suppose that a 1% increase in expected inflation causes a 1% increase in the risk-free rate. Holding all other factors constant, what will this do to the firm’s cost of equity? Is it reasonable to hold all other factors constant? What other part of the calculation of the cost of equity is likely to change if expected inflation rises.

### Recently Asked Questions

- PleaSE DO IT TO FULL DETAILS....................................

- Presented below are data on three promissory notes. Determine the missing amounts. (Use 360 days for calculation.) Date of Note Terms Maturity Date Principal

- Which of the following is true? A. some valid arguments have all false premises and a false conclusion B. Valid arguments all have at least one false premise