n NISM Certifications
XV NISM Series XV
Medium

Calculate the cost of equity using CAPM if risk-free rate is 7%, market risk premium is 9%, and beta is 0.60.

Practice question from NISM XV Mock Test 2 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. A

    8.1%

  2. B

    13.8%

  3. C

    10.5%

  4. 12.4%

    Correct answer

Why this is the answer

Cost of Equity = Rf + β(Rm − Rf) = 7% + (0.60 × 9%) = 12.4%.

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