-The Historical Returns Data for the Past Three Years for Company

question 13

Multiple Choice

-The historical returns data for the past three years for Company A's stock is -6.0%, 15%,
15% and that of the market portfolio is 10%, 10% and 16%. If the risk-free rate of return is
4%, what is the cost of equity capital (required rate of return of company A's common stock)
Using CAPM?

• A) 18%
• B) 14%
• C) 12%
• D) None of the above

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