Using the CAPM approach,what is the best estimate of the cost of equity for CGT?

Question

Quizplus · Accepted Answer

The correct answer is A because the CAPM approach estimates the cost of equity as the risk-free rate plus a risk premium. The risk premium is determined by multiplying the beta of the stock by the expected market risk premium. In this case, the risk-free rate is 5%, the beta of the stock is 0.8, and the expected market risk premium is 8%. Therefore, the cost of equity for CGT is 5% + 0.8 * 8% = 13%.

Using the CAPM Approach,what Is the Best Estimate of the Cost