Suppose the market portfolio has an expected return of 10% and a volatility of 20%, while Microsoft's

Question:

Suppose the market has an of 10% and a volatility of 20%, while Microsoft's stock has a volatility of 30%.
a. Given its higher volatility, should we expect Microsoft to have an equity that is higher than 10%?
b. What would have to be true for Microsoft's equity cost of capiatal to be equal to 10%?
Cost Of Capital
Cost of capital refers to the opportunity cost of making a specific investment . Cost of capital (COC) is the rate of return that a firm must earn on its project investments to maintain its market value and attract funds. COC is the required rate of... Expected Return
The expected return is the profit or loss an investor anticipates on an investment that has known or anticipated rates of return (RoR). It is calculated by multiplying potential outcomes by the chances of them occurring and then totaling these... Portfolio
A portfolio is a grouping of financial assets such as stocks, bonds, commodities, currencies and cash equivalents, as well as their fund counterparts, including mutual, exchange-traded and closed funds. A portfolio can also consist of non-publicly...