Question: Question 3 Question 3 2 points Save Answer Correlation Coefficients Telmex Mexico World SD E(R) (%) (%) Telmex 1.00 0.86 0.38 17.3 ? Mexico 1.00

Question 3

Question 3 2 points Save Answer Correlation Coefficients Telmex Mexico World SD E(R) (%) (%) Telmex 1.00 0.86 0.38 17.3 ? Mexico 1.00 0.52 14.5 14.4 World 1.00 12.6 11.1 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 3.6%. Suppose the Mexican stock market is segmented from the rest of the world. Using the CAPM paradigm, estimate the equity cost of capital of Telmex (XX.XX%)

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