Question: The stock market data given by the following table. Correlation Coefficients Telmex Mexico World SD (%) RR (%) Telmex 1.00 1.20 0.90 24 ? Mexico

The stock market data given by the following table.

	Correlation Coefficients
	Telmex	Mexico	World	SD(%)	RR (%)
Telmex	1.00	1.20	0.90	24	?
Mexico		1.00	1.05	20	14
World			1.00	15	12

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 ( RR ). The risk-free rate is 4%.

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.

Equity cost:

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