The ____ the beta coefficient the ____ the expected return, on average.

a. higher; higher

b. higher; lower

c. lower; higher

d. lower; lower or higher (depending on the level of the risk-free rate)

e. None of the above

Given the following information,what is your best estimate for the firm s cost of equity on January2,2012,if the stock sells for$42on that day?

DateDividend

12/31/07$1.45

12/31/08$1.68

12/31/09$1.95

12/31/10$2.27

12/31/11$2.63

a. About 16%

b. About 22%

c. About 23%

d. Cannot be determined

e. None of the above