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
Section: Chapter Questions
Problem 1PS
icon
Related questions
Question
plz solve!!!
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%
Expert Solution
steps

Step by step

Solved in 2 steps

Blurred answer
Knowledge Booster
Real Estate
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, finance and related others by exploring similar questions and additional content below.
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
Essentials Of Investments
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
FUNDAMENTALS OF CORPORATE FINANCE
FUNDAMENTALS OF CORPORATE FINANCE
Finance
ISBN:
9781260013962
Author:
BREALEY
Publisher:
RENT MCG
Financial Management: Theory & Practice
Financial Management: Theory & Practice
Finance
ISBN:
9781337909730
Author:
Brigham
Publisher:
Cengage
Foundations Of Finance
Foundations Of Finance
Finance
ISBN:
9780134897264
Author:
KEOWN, Arthur J., Martin, John D., PETTY, J. William
Publisher:
Pearson,
Fundamentals of Financial Management (MindTap Cou…
Fundamentals of Financial Management (MindTap Cou…
Finance
ISBN:
9781337395250
Author:
Eugene F. Brigham, Joel F. Houston
Publisher:
Cengage Learning
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Corporate Finance (The Mcgraw-hill/Irwin Series i…
Finance
ISBN:
9780077861759
Author:
Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor
Publisher:
McGraw-Hill Education