Assuming a 15% risk-free rate, cost of equity of 25% and a beta of 1, what is the excess market premium?

10%

15% - Incorrect

25%

1%

i m anable to calculate

10%

15% - Incorrect

25%

1%

i m anable to calculate

Excess Market Premium
DCF
Discount Cash Flow (DCF)
CAPM
Capital Asset Pricing Model
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Nov 11 2012 07:30 PM

Yashodha, since this is a quiz question I cant give the answer here, but I am going to explain the general concept so you can calculate the answer.

This question is based on the concept of CAPM (Capital Asset Pricing Model). The formula is Ra=Rf+Beta(Rm-Rf), were Ra is cost of equity, Rf is the risk free rate, and Rm is the excess market prremium. Bu substituting these value you should get the answer.

Nov 20 2012 10:36 AM
This question is based on the concept of CAPM (Capital Asset Pricing Model). The formula is Ra=Rf+Beta(Rm-Rf), were Ra is cost of equity, Rf is the risk free rate, and Rm is the excess market prremium. Bu substituting these value you should get the answer.