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CAPM

This topic has 1 reply, 2 voices, and was last updated 6 years ago by John Moffat.

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May 4, 2018 at 5:32 pm #450109
ziniya
Member
- Topics: 14
- Replies: 4
Sir,
Question#189 of BPP kit asking for the calculation of cost of equity.
Using CAPM formula the in my opinion it should be the difference of Rm-Rf to be put in the question.
The examiner has put the Rf 8% only and then multiplied it with equity beta.
I am not understanding what he has done here.
Please help me with this.
Thanks
Regards
May 5, 2018 at 8:39 am #450169
John Moffat
Keymaster
- Topics: 57
- Replies: 54500
The question says that the market premium is 8%. The market premium is the excess of the market return over the risk free rate. I do make this point in my free lectures.
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