Correlation Coefficients Telmex Telmex Mexico World 1.00 Mexico 1.20 World SD(%) R (%) 0.90 24 ? 1.00 1.05 1.00 20 14 15 12 The above table provides the correlations among Telmex, a telephone or communication company located in Mexico, the Mexico stock market index, and the world market index, together with the standard deviations (SD) of returns and the expected returns (R). The risk-free rate is 6%. Required: Suppose the Mexican stock market is segmented from the rest of the world. Using the CAPM paradigm, estimate the equity cost of capital of Telmex. Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Answer is complete but not entirely correct. Equity cost 6.36 x %
Correlation Coefficients Telmex Telmex Mexico World 1.00 Mexico 1.20 World SD(%) R (%) 0.90 24 ? 1.00 1.05 1.00 20 14 15 12 The above table provides the correlations among Telmex, a telephone or communication company located in Mexico, the Mexico stock market index, and the world market index, together with the standard deviations (SD) of returns and the expected returns (R). The risk-free rate is 6%. Required: Suppose the Mexican stock market is segmented from the rest of the world. Using the CAPM paradigm, estimate the equity cost of capital of Telmex. Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Answer is complete but not entirely correct. Equity cost 6.36 x %
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
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Transcribed Image Text:Correlation Coefficients
Telmex
Telmex
Mexico
World
1.00
Mexico
1.20
World
SD(%)
R (%)
0.90
24
?
1.00
1.05
1.00
20
14
15
12
The above table provides the correlations among Telmex, a telephone or communication company located in Mexico, the Mexico
stock market index, and the world market index, together with the standard deviations (SD) of returns and the expected returns (R).
The risk-free rate is 6%.
Required:
Suppose the Mexican stock market is segmented from the rest of the world. Using the CAPM paradigm, estimate the equity cost of
capital of Telmex.
Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
Answer is complete but not entirely correct.
Equity cost
6.36 x %
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