Question
American Airlines has CAPM beta of 1.7, which is estimated over the time-period from 01/2017 to 12/2021. The market risk premium is 5.8 % per
American Airlines has CAPM beta of 1.7, which is estimated over the time-period from 01/2017 to 12/2021. The market risk premium is 5.8 % per year, the yield-to-maturity (YTM) on a 3-year government bond is 1.4 % per year, the YTM on a 5-year government bond is 2.4 % per year and the YTM on a 10-year U.S. government bond is 3.4 % per year.
What is the cost of equity?
A. | The cost of equity is 8.20% | |
B. | The cost of equity is 9.91% | |
C. | The cost of equity is 12.26% | |
D. | The cost of equity is 5.80% | |
E. | The cost of equity is 11.26% | |
F. | The cost of equity is 9.20% | |
G. | The cost of equity is 10.91% | |
H. | The cost of equity is 11.91% | |
I. | The cost of equity is 3.40% | |
J. | The cost of equity is 13.26% |
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