The capital asset pricing model (CAPM) is widely used to estimate the cost (required return) of common equity to a corporation. The CAPM looks like this:

r_s = r_RF + b_i(RP_m) where

r_s is the rate of return required for the stock

r_RF is the risk free rate, usually from the 10-year Treasury yield

b_i is the individual stock's beta coefficient as estimated from historical data

RP_m is the market risk premium, that is, the difference between the risk-free rate and the rate investors have required on the average stock.

Here's an example for a risk-free rate of 2%, a beta of 1.5, and a market premium of 6%:

2% + 1.5*6% or 2% + 9% = 11%

What would be the cost of common equity for a company if the risk free rate is 1.5%, the company's beta is .85 and the market premium is 5%?

Answer in percent form to one decimal place, e.g. 8.25%.