# Capital Asset Pricing Model

Assume that Rf = 5 and Km=10.5 percent. Compute Kj for the following betas, using an increase in interest rates changes Rf to 6.0 percent, and the market risk premium (Km-Rf) changes to 7.0 percent. Compute Kj for the three betas of 0.6, 1.3 and 1.9

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#### Solution Preview

Please find my response below.

1. Rf = 5%; Km = 10.5%, Risk Premium = 10.5-5=5.5%

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#### Solution Summary

The solution calculates the cost of capital using CAPM. The calculations are shown in the response and are very easy to understand. Overall, a great response.

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