The stock market data is given in the following table. Telmex Mexico World Correlation Coefficients World 0.60 0.75 1.00 Telmex 1.00 Mexico 0.90 1.00 SD (%) 18 15 10 R (%) ? 14 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 4%. Required: Suppose now that Telmex has made its shares tradable internationally via cross-listing on NYSE. Again using the CAPM paradigm, estimate Telmex's equity cost of capital. Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
The stock market data is given in the following table. Telmex Mexico World Correlation Coefficients World 0.60 0.75 1.00 Telmex 1.00 Mexico 0.90 1.00 SD (%) 18 15 10 R (%) ? 14 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 4%. Required: Suppose now that Telmex has made its shares tradable internationally via cross-listing on NYSE. Again using the CAPM paradigm, estimate Telmex's equity cost of capital. Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
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:The stock market data is given in the following table.
Telmex
Mexico
World
Correlation Coefficients
World
0.60
0.75
1.00
Telmex
1.00
Mexico
0.90
1.00
SD (%)
18
15
10
R (%)
?
14
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 4%.
Required:
Suppose now that Telmex has made its shares tradable internationally via cross-listing on NYSE. Again using the CAPM paradigm,
estimate Telmex's equity cost of capital.
Note: Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.
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