Answer:
The appropriate answer is "13.82%".
Explanation:
Given:
Risk free rate,
[tex]R_f=4.10[/tex]
Beta of stock,
[tex]\beta=1.13[/tex]
Market rate,
= [tex]12.7[/tex]
Now,
The market risk premium will be:
⇒ [tex]R_p[/tex] = [tex]Market \ rate-Risk \ free \ rate[/tex]
= [tex]12.7-4.1[/tex]
= [tex]8.60[/tex] (%)
hence,
The cost of equity will be:
⇒ [tex]r=R_f+\beta\times R_p[/tex]
[tex]=4.10+1.13\times 8.60[/tex]
[tex]=4.10+ 9.718[/tex]
[tex]=13.82[/tex] (%)
