THE RISKLESS RATE OF INTEREST IS 6 PERCENT, THE EXPECTED RATE OF R...

24. The riskless rate of interest is 6 percent, the expected rate of return on a market portfolio is 8 percent, and the beta coefficient of a common stock is 1.2. What is the cost of this common stock? A. 5.0% B. 6.3% C. 7.3% D. 7.9% * E. 8.4% Solution: Use Equation (19-3): Cost of common stock = 0.06 + (0.08 - 0.06)1.2 = 8.4%.