Answer:
the required rate of return for Barker's investor is 10.17%
Explanation:
First, We have to calcualte the CAPM
(Capital Assets Pricing Model)
[tex]Ke= r_f + \beta (r_m-r_f)[/tex]
risk free = 0.02
premium market = (market rate - risk free) 0.047
beta(non diversifiable risk) = 1.1
[tex]Ke= 0.02 + 1.1 (0.047)[/tex]
Ke 0.07170
now we add the inflation premium:
0.0717 + 0.03 = 0.1017 = 10.17%
