Monarch's beta is 1.06, the present T-bond rate is 6% and the return on the S&P 500 is 15.25%.What is Monarch's cost of common equity using the CAPM approach?

Name: Monarch's beta is 1.06, the present T-bond rate is 6% and the return on the S&P 500 is 15.25%.What is Monarch's cost of common equity using the CAPM approach?
Brand: Quizplus
Rating: 4.9 (50 reviews)

Question

Quizplus · Accepted Answer

Using the CAPM model, the cost of equity is calculated as:
Cost of equity = Risk free rate + Beta * (Market return - Risk free rate)
= 6% + 1.06 * (15.25% - 6%) 
= 15.81%

Monarch's Beta Is 1