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Correlation Coefficients SD(%) R(%) TelmexMexico World Telmex 1.00 0.95 0.55 20 ? Mexico 1.00 0.75 16 14 World 1.00 12 12 The above table provides
Correlation Coefficients SD(%) R(%) TelmexMexico World Telmex 1.00 0.95 0.55 20 ? Mexico 1.00 0.75 16 14 World 1.00 12 12 The above table provides the correlations among Telmex, a telephone/communication company located in Mexico, the Mexico stock market index, and the world market index, together with the standard deviations (SD) of returns and the expected returns (R). The risk-free rate is 7%. (a) Compute the domestic country beta of telmex. The beta is (Round your answer to 2 decimal places) (b) Compute the world beta of Telmex. The beta is . (Round your answer to 2 decimal places) (C) Suppose the Mexican stock market is segmented from the rest of the world. Using the CAPM paradigm, estimate the equity cost of capital of Telmex. The equity cost of capital is - (Round your answer to 2 decimal places. Omit the "%" in your answer and do not use percent in your answer) (d) Suppose now that Telmex has made its shares tradable internationally via cross-listing on NYSE. Again using the CAPM paradigm, estimate Telmex's equity cost of capital. The equity cost of capital is . (Round your answer to 2 decimal places. Omit the "%" in your answer and do not use percent in your answer)
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