n NISM Certifications
XV NISM Series XV
Medium

Find the Cost of Equity if the risk-free rate is 5%, market risk premium is 8%, 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

    11.08%

  2. B

    10.50%

  3. 9.8%

    Correct answer

  4. D

    8.65%

Why this is the answer

Using CAPM: Re = rf + β(Rm − rf) = 5% + 0.60 × 8% = 5% + 4.8% = 9.8%.

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