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Question 2 1 pts The Tubby Ball Corporations common stock has a beta of 1.3. If the risk-free rate is 4.5 percent and the exQuestion 3 1 pts Holdup Bank has an issue of preferred stock with a $6 stated dividend that just sold for $92 per share. Hold

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Answer #1

Dear student, only one question is allowed at a time. I am answering the first question

2)

As per capital asset pricing model, Cost of equity is given by

Re = Rf + ( Rm – Rf ) x Beta

Where,

Re = Cost of equity

Rf = Risk free rate = 4.5%

Rm = Return on market = 12%

Beta = Beta of the stock = 1.3

So, putting the values in above question we get

Re = 4.5 + ( 12 – 4.5 ) x 1.3

= 4.5 + 7.5 x 1.3

= 4.5 + 9.75

= 14.25%

So, as per above discussion, option B is the correct option

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