Complete the following:

You have been asked to assess the implied risk premium on the Timbuktu Stock Exchange $($TSE$).$ The index is trading at $1050,$ and the dividend yield is $3\%.$ The current long term bond rate is $6\mathrm{.}5\%,$ and the expected long term nominal growth rate in the economy is $6\%.$ Estimate the implied risk premium for equities.

You have been asked to estimate the beta for a large South Korean company, with large holdings in steel and financial services. A regression of stock returns against the local market index yields a beta of $1\mathrm{.}10,$ but the firm is $15\%$ of the index. You have collected the average betas for global companies in each of the sectors$,$ as well as the average debt equity ratios in each sector:

Sector Average Beta Average D$/$E Ration

Steel $1\mathrm{.}1830\%$

Financial Services $1\mathrm{.}1470\%$

$($The average tax rate for these firms is $40\%)$

In the most recent period, the company you are analyzing earned $70\%$ of its operating income from steel and $30\%$ from financial services. The firm also had a debt$/$equity ratio of $150\%,$ and a tax rate of $30\%.$

Estimate the beta for the company.

If the Korean government bond rate in nominal Won is $12\%,$ Korea$$s rating is BBB $($Country bonds with this rating earn a spread of $2\%$ over the U$.$S$.$ long bond rate$)$ and Korean equities are twice as volatile as Korean bonds, estimate the cost of equity for this company.