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The stock market data given by the following table. ...

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Finance

The stock market data given by the following table.

Correlation Coefficients
Telmex Mexico World SD(%) RR (%)
Telmex 1.00 0.75 0.50 20 ?
Mexico 1.00 0.60 12 14
World 1.00 8 12

The above table provides the correlations among Telmex, a telephone/communication company located in Mexico, the Mexico stock market index, and the world market index, together with the standard deviations (SD) of returns and the expected returns ( RR ). The risk-free rate is 7%.

Suppose now that Telmex has made its shares tradable internationally via crosslisting on the NYSE. Again using the CAPM paradigm, estimate Telmexs equity cost of capital.

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