By regressing monthly stock returns of Starbucks (NASDAQ: SBUX) on monthly returns of the S&P 500 index for the past five years, you obtained an estimated beta of 0.92. In addition, the current yield to maturity (YTM) for the 3-month T-Bill is 0.10%, 10-year T-Note is 0.66%, and 30-year T-Bond is 1.40%. 1. Based on the following table on historical returns on various asset classes, what is your estimate of the expected market risk premium (that is, E[rm r]) in the CAPM formula)? #int: arithmetic means tend to provide better estimates of future expected returns Geometric Arithmetic Asset class Mean (%) Mean (%) Large Company Stocks (i.e., S&P 500) 9.8 11.8 Small Company Stocks 11.9 16.5 Long-term Corporate Bonds 6.1 6.4 Long-term (30-year) Treasury Bonds 5.7 6.1 Intermediate-term (10-year) Treasury Bonds 5.4 5.5 U.S. Treasury Bills (3-month) 3.6 3.6 Standard Deviation (%) 20.3 32.5 8.4 9.8 5.7 3.1 2. Using the expected market risk premium estimated in Question 1 and other information provided above, estimate the cost of equity for Starbucks using the CAPM. Clearly state any assumptions that you need to make and provide a numerical