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%?

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Quizplus · Accepted Answer

The cost of equity using CAPM is calculated as:Cost of equity = Risk-free rate + Beta * (Expected market return - Risk-free rate)= 6% + 1.5 * (15% - 6%)= 6% + 1.5 * 9%= 6% + 13.5%= 19.5%

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