Question

What among the following is the correct formula to calculate the cost of Equity under CAPM model?

A Risk free rate + Beta (Market rate – risk free rate) Correct Answer Incorrect Answer
B Repo rate + Beta (Market rate – Repo rate) Correct Answer Incorrect Answer
C Risk free rate + standard deviation (Market rate – risk free rate) Correct Answer Incorrect Answer
D Repo rate + Standard deviation (Market rate – Repo rate) Correct Answer Incorrect Answer
E Repo rate + systematic Risk (Market rate – Repo rate) Correct Answer Incorrect Answer

Solution

Cost of Equity = Risk free rate + Beta (Market rate – risk free rate)

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