The stock market data is given in the following table. Correlation Coefficients Telmex Telmex Mexico World 1.00 Mexico World SD (%) R (%) 1.50 1.00 18 ? 1.00 1.20 15 14 1.00 10 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 7%. 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 Telmex Mexico World 1.00 Mexico World SD (%) R (%) 1.50 1.00 18 ? 1.00 1.20 15 14 1.00 10 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 7%. 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
Problem 1PS
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Transcribed Image Text:The stock market data is given in the following table.
Correlation Coefficients
Telmex
Telmex
Mexico
World
1.00
Mexico
World
SD (%)
R (%)
1.50
1.00
18
?
1.00
1.20
15
14
1.00
10
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 7%.
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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