In Applying the CAPM to Estimate the Cost of Equity

question 24

Multiple Choice

In applying the CAPM to estimate the cost of equity capital, which of the following elements is not subject to dispute or controversy?

• A)Expected rate of return on the market, rM .
• B)The stock's beta coefficient, βi.
• C)Risk-free rate, rRF.
• D)Market risk premium (MRP).
• E)All of the above are subject to dispute.

---

Definitions:

High Self-Monitors

Individuals who are highly sensitive to social cues and adjust their behavior accordingly in different social settings.

True Feelings

Genuine emotions or sentiments that a person experiences and may or may not express openly.

External Situations

Circumstances or events that occur outside of an individual's control, which can impact their behavior and emotions.

Self-Schema

Cognitive representations of oneself that organize and guide the processing of self-relevant information.