Answer to Question #211410 in Finance for Carol

Question

ABC Corporation has a beta coefficient of 0.88. If the risk-free rate is 4% and return on the broad market index is 8%; calculate the expected return.

Answer 1

Cost of equity= risk free rate + beta coefficient equity ×(broad market return - risk free rate)

Cost of equity= 4% + 0.88 × (8%-4%)

4% +0.88×4%= 7.52% Answer= 7.52%