Company ABC Corporation is operating on US market. Risk-free rate on US market is equal to 2%. Beta of company ABC is equal to 1.5. The estimate of risk-premium is equal to 6%.

Question 3.1: Assuming that CAPM model holds, find return on equity for company ABC?

by rating:beta average

a and above = less than 0.05

BBB = 0.10

BB = 0.17

B = 0.26

CCC = 0.31

By maturity

1-5 year = 0.01

5-10 years = 0.06

10-15 years = 0.07

more than 15 years = 0.14