Finance-Suppose the 10-year T-bond rate is 3%.

| January 30, 2017

Question
Suppose the 10-year T-bond rate is 3%. The Market Risk Premium is 5%. The equity beta for the firm is 1.5. What is the cost of equity using the Capital Asset Pricing Model (CAPM)?

a.
7.5%

b.
9.5%

c.
10.5%

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