According to CAPM Estimates,what Is the Cost of Equity for a Firm

question 4

Multiple Choice

According to CAPM estimates,what is the cost of equity for a firm with a beta of 1.5 when the risk-free interest rate is 6% and the expected return on the market portfolio is 15%?

• A) 19.5%
• B) 21.0%
• C) 22.5%
• D) 24.0%

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Definitions:

Welfare

Governmental support aimed at ensuring the basic physical and material well-being of individuals, often including provisions for health care, education, and housing.

Helping

The act of providing assistance or support to others in need, often motivated by empathy, moral obligations, or the anticipation of reciprocation.

Bystander Effect

A social psychological phenomenon in which individuals are less likely to offer help to a victim when other people are present.

Zero-sum Game

A situation or game in which one person's gain is equivalent to another's loss, so the net change in wealth or benefit is zero.