The beta of a firm's equity in Switzerland is 1.25.The risk-free rate is 4% and market risk premium is 8.4%.Calculate the required rate of return for the equity of this firm.

Question

Quizplus · Accepted Answer

The required rate of return (RRR) for the equity of the firm can be calculated using the Capital Asset Pricing Model (CAPM):

RRR = Risk-free rate + Beta * Market risk premium
    = 4% + 1.25 * 8.4%
    = 14.5%

Therefore, the required rate of return for the equity of this firm is 14.5%. The correct answer is option C.

The Beta of a Firm's Equity in Switzerland Is 1