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:

Reciprocity Norm

A social norm that expects individuals to respond to each other in kind, rewarding kind actions with kindness.

Ethnic Groups

Socially defined categories of people who identify with each other based on common ancestral, cultural, national, or historical experience.

Mirror-Image Perceptions

The concept that parties in conflict often perceive the other side as ethically wrong or evil, while viewing themselves in a positive light.

Prejudiced Heterosexuals

Individuals identifying as heterosexual who harbor biased opinions or feelings against those not conforming to heterosexual norms.