Question $7$

$1$ pts

$\backslash$table$[[$Company$,$Beta,Standard Error$],[$Canadian Pacific,$1\mathrm{.}07,0\mathrm{.}18],[$CSX$,1\mathrm{.}18,\mathrm{.}24],[$Norfolk Southern,$1\mathrm{.}33,\mathrm{.}18],[$Kansas City Southern,$0\mathrm{.}97,0\mathrm{.}20],[$Union Pacific,$1\mathrm{.}09,0\mathrm{.}16],[$Industry portfolio,$1\mathrm{.}13,0\mathrm{.}14]]$

A$.$ Calculate Union Pacific's cost of equity from the CAPM using it's own beta estimate and the industry beta estimate. How different are your answers? Assume a risk$-$free rate of $2\%$ and a market risk premium of $7\%.$ Please show your work.