If risk-free rate = 4%, market return = 10%, beta = 1.5, cost of equity (CAPM) is:
A10%
B13%CORRECT
C15%
D19%
CFACorporate Finance
AI
Toaster Teacher
Why the answer is B, and why the others tempt you.
Re = 4 + 1.5(10 − 4) = 4 + 9 = 13%.
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