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Suppose the market portfolio has an expected return of 10% and a volatility of 20%, while Microsofts stock has a volatility of 30%. Given its
Suppose the market portfolio has an expected return of 10% and a volatility of 20%, while Microsofts stock has a volatility of 30%.
Given its higher volatility, should we expect Microsoft to have an equity cost of capital that is higher than 10%? What would have to be true for Microsofts equity cost of capital to be equal to 10%?
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