Assignment on correlation coefficients

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Reference no: EM133112136

Correlation Coefficients

 

Telmex

Mexico

World

SD (%)

E(R) (%)

Telmex

1.00

0.9

0.27

17.5

?

Mexico

 

1.00

0.5

15

14.3

World

 

 

1.00

11.3

11.7

The above table provides the correlations among Telmex, a telephone/communication company located in Mexico, the Mexico stock market index, and the world market index, together with the standard deviations ( SD ) of returns and the expected returns E(R). The risk-free rate is 4.6%.

Suppose the Mexican stock market is segmented from the rest of the world. Using the CAPM paradigm, estimate the equity cost of capital of Telmex (XX.XX%)

Reference no: EM133112136

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