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SIr, I would like to ask,
is Re= Ru + D/E (Ru-Rd)
cost of equity answer is the same as
Re = Rf+B(Rm-Rf) ?
in which the latter part of both equation equals to the premium for additional risk taken by investor ?
if i use either way to calculate, could i get the same answer?
during my study , i had discovered about the premium part, but would like to seek further clarification.
thank you Sir John in advance
I don’t know where you are getting your first equation from – it is not an equation that is relevant for Paper FM and is certainly not the same as the second equation (which is very much relevant for Paper FM).
I explain CAPM in detail in my free lectures. The lectures are a complete free course for Paper FM and cover everything needed to be able to pass the exam well.
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