According to CAPM estimates, what is the cost of equity for a firm with 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% Expected return on stock = 6% + 1.5(15% - 6%)
= 6 + 13.5
Correct Answer:
Verified
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