ammed trading company issued equity share has a beta of 0.6, while Safa foods company equity share has a beta of 1.1.

Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
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Mohammed trading company issued equity share has a beta of 0.6, while Safa foods company equity share has a beta of 1.1.
both the companies operate in different countries. Mohammed trading company is registered in Saudi Arabia and Safa foods
company is registered in Bahrain. The expected return on the market in Saudi Arabia is 15%, and the risk-free rate is 7% in Saudi
Arabia. The expected return on the market in Bahrain is 12%, and the risk-free rate is same as in Saudi Arabia. Using the capital-
asset pricing model and making use of the information above, find the cost of equity of Mohammed trading company and Safa
foods company.
11.8 % and 125 %
11.8 % and 15.8 %
15.8 % and 10.8 %
10.8 % and 12.5%
Transcribed Image Text:Mohammed trading company issued equity share has a beta of 0.6, while Safa foods company equity share has a beta of 1.1. both the companies operate in different countries. Mohammed trading company is registered in Saudi Arabia and Safa foods company is registered in Bahrain. The expected return on the market in Saudi Arabia is 15%, and the risk-free rate is 7% in Saudi Arabia. The expected return on the market in Bahrain is 12%, and the risk-free rate is same as in Saudi Arabia. Using the capital- asset pricing model and making use of the information above, find the cost of equity of Mohammed trading company and Safa foods company. 11.8 % and 125 % 11.8 % and 15.8 % 15.8 % and 10.8 % 10.8 % and 12.5%
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