GENERAL INSTRUCTIONS: ENTER YOUR ANSWER WITHOUT THE % SIGN, BUT FORMATTED AS PERCENT WITH TWO DECIMAL PLACES, for instance if you compute 0.03468 interest rate on your calculator then ENTER 3.47 AS YOUR ANSWER. DO NOT ROUND IN YOUR CALCULATION STEPS (use calculator memory functions) TO AVOID ROUNDING ERRORS. There is a little bit of tolerance built into accepting/rejecting your answer, but if you round in your intermediate calculations you may be too far off.

Rumbling Motors Inc. has shares of common stock with a beta of 0.5. Assume the risk-free rate is equal to 3% and equity market risk premium of 6%. Calculate the company's cost of equity.