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Coeden Co

This topic has 1 reply, 2 voices, and was last updated 5 years ago by John Moffat.

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March 18, 2020 at 1:40 pm #565383
kudra03
Participant
- Topics: 5
- Replies: 4
1. In calculating the cost of equity, i do not understand why the risk free rate was not subtracted from the market risk premium
2. The value of BBB rating was not given in the question, how was it derived in calculating kd?
March 19, 2020 at 5:22 am #565393
John Moffat
Keymaster
- Topics: 57
- Replies: 54655
1. As I explain in my free lectures, the market premium is the market return less the risk free rate. We therefore do not subtract the risk free rate again.
2. The question says that the credit spread on BBB rated bonds is 90 basis points (i.e. 0.90%)
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