The capital asset pricing model is a model that was developed to estimate risk in equity cash flows, particularly for publicly traded stock equities. Its model is given by:
CAPM à Cost of equity = de = Risk free rate + Beta x [Total Market Return – Risk free rate]
The risk free rate is measured at 1.5% (short-term government treasuries), the total market return is measured at 12.1% (S&P 500 average long-run performance), and the beta for a particular security is measured at 1.7 (beta is: Beta Described). What is the cost of equity given these numbers?