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Historical returns data for the past

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The historical returns data for the past three years for AAA's stock is -6.0%, 15%, 15% and that of the market portfolio is 10%, 10% and 16%. If the risk-free rate of return is 4%, what is the cost of equity capital according to the CAPM? Calculate your answer IN DECIMAL form, and precise to two digits after the comma.

Answer: 0.18

Could you explain how do you derive the answer!

Reference no: EM132500923

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