n NISM Certifications
XV NISM Series XV
Medium

Risk-free rate = 6%, Market Risk Premium = 8%, Beta = 0.7. Calculate the Cost of Equity.

Practice question from NISM XV Mock Test 4 — bank. The correct answer is highlighted below with a full explanation.

Options

  1. 11.60%

    Correct answer

  2. B

    7.40%

  3. C

    9.50%

  4. D

    13.25%

Why this is the answer

Cost of Equity = Risk-free rate + Beta × Market Risk Premium = 6 + 0.7 × 8 = 11.6%. This represents the expected return required by equity investors.

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