Question: Correlation Coefficients Telmex Mexico World SD (%) E(R) (%) Telmex 1.00 0.8 0.3 18.3 ? Mexico 1.00 0.58 14.5 12.3 World 1.00 10.5 10.8 The

Correlation Coefficients

	Telmex	Mexico	World	SD (%)	E(R) (%)
Telmex	1.00	0.8	0.3	18.3	?
Mexico		1.00	0.58	14.5	12.3
World			1.00	10.5	10.8

The above table provides the correlations among Telmex, a telephone/communication company located in Mexico, the Mexico stock market index, and the world market index, together with the standard deviations ( SD ) of returns and the expected returns E(R). The risk-free rate is 5.1%. Suppose that Telmex shares trade in the NYSE. Using the CAPM paradigm, estimate the equity cost of capital of Telmex (Answer = XX.XX%)

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