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    Question

    Which of the following model/ method makes use of Beta

    (β) in the calculation of the cost of equity?
    A Risk-Adjusted Discount Model Correct Answer Incorrect Answer
    B MM Model Correct Answer Incorrect Answer
    C Price Earning Method Correct Answer Incorrect Answer
    D Capital Assets Pricing Method Correct Answer Incorrect Answer
    E All of the above Correct Answer Incorrect Answer

    Solution

    The Capital Assets Pricing Model (CAPM) makes use of Beta (β) in the calculation of the cost of equity.  The CAPM is a widely used financial model that helps to estimate the expected return on an investment based on its level of risk. It uses the beta coefficient, which measures the sensitivity of an asset's returns to market returns, to calculate the cost of equity capital.

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