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uppose the market portfolio has an expected return of 10% and a volatility of 20%, nd Microsoft's stock has a volatility of 15%. Given that its volatility is lower than ie one of the market, should we expect Microsoft to have an equity cost of capital hat is lower than 10% ? A. Yes, because a correlation cannot exceed one, Microsoft's beta must be below one and thus its cost of equity is lower than the expected return on the market. B. No, volatility includes diversifiable risk, and so it cannot be used to assess the equity cost of capital. C. Yes, lower volatility means lower risk, so Microsoft is less risky than the market and should therefore have a lower return. D. There is not enough information in this problem to answer whether Microsoft has a higher or lower cost of capital than 10%