The stock market data is given in the following table. Correlation Coefficients Telmex Mexico World Telmex 1.00 Mexico 0.75 World SD(%) R (%) 0.50 20 ? 1.00 0.60 12 14 1.00 8 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 8%. 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. Equity cost %
The stock market data is given in the following table. Correlation Coefficients Telmex Mexico World Telmex 1.00 Mexico 0.75 World SD(%) R (%) 0.50 20 ? 1.00 0.60 12 14 1.00 8 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 8%. 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. Equity cost %
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
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Transcribed Image Text:The stock market data is given in the following table.
Correlation Coefficients
Telmex
Mexico
World
Telmex
1.00
Mexico
0.75
World
SD(%)
R (%)
0.50
20
?
1.00
0.60
12
14
1.00
8
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 8%.
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.
Equity cost
%
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