Question: 9. When market portfolio increase (decrease) by 10%, security A increase (decrease) by 5%, the beta of security A is 2. A question requiring a

9. When market portfolio increase (decrease) by 10%, security A increase (decrease) by 5%, the beta of security A is 2.

A question requiring a 'True/False' answer.

10. CAPM describes the relationship between and expected return for stocks.

A question requiring a 'True/False' answer.

11. Please use CAPM to estimate the cost of equity for Company "A".

The beta of Company "A" is 1.45

Averaged market risk premium is 5%.

Risk-free interest rate is 0.087% (10 year Japanese government bond yield)

The expected return for Company "A"'s shareholder (cost of equity) is

A multiple-choice question with one possible answer.

  1. 6.343%
  2. 7.557%
  3. 0.126%
  4. 5.087%
  5. 7.337%
  6. 7.25%

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