Suppose the Domestic U $\overline { \mathcal { R } } \text { U.S. }$

question 93

Multiple Choice

Suppose the domestic U.S.beta of IBM is 1.0,that is    _U.S
?  _IMB = 1.0,and that the expected return on the U.S.market portfolio is $\overline { \mathcal { R } } \text { U.S. }$ = 12 percent,and that the U.S.T-bill rate is 6 percent.If the world beta measure of IBM is    _world
?  _IMB = 0.80 then we can say

• A)that if the U.S.markets are fully integrated with the rest of the world,IBM's cost of equity capital would be 20 percent lower than if U.S.markets were segmented.
• B)that if the U.S.markets are fully integrated with the rest of the world,IBM's cost of equity capital would be 10 percent lower than if U.S.markets were segmented.
• C)that if the U.S.markets are fully integrated with the rest of the world,IBM's cost of equity capital would be one-third lower than if U.S.markets were segmented.
• D)none of the options

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