Given its higher$$ volatility, should we expect Microsoft to have an equity cost of capital that is higher than

$10\%10\%?$

$($Select the best choice$$ below.$)$

A$.$

$$Yes$,$ although some of$$ Microsoft's risk is$$ diversifiable, enough is systematic so that it should have a higher return than the market.

B$.$

$$No$,$ volatility includes diversifiable$$ risk, and so cannot be used to assess the equity cost of capital.

C$.$

$$Yes$,$ higher volatility implies higher$$ risk, so Microsoft is riskier than the market and should therefore have a higher return.

D$.$

There is not enough information in this problem to answer this question definitively.