"cost of common stock equity: capm j& m corporation common stock has a beta, b, of 1.2. the risk-free rate is 6%, and the market return is 11%. a. determine the risk premium on j& m common stock. b. determine the required return that j& m common stock should provide. c. determine j& m's cost of common stock equity using the capm."

a. Risk Premium on J & M common stock = Return on Market - Risk Free Rate

Risk Premium on J & M common stock = 11% - 6%

Risk Premium on J & M common stock = 5%

b. Required Return = Rf + Beta * (RM - RF)

= 6% + 1.2*5%

= 6% + 6%

= 12%

So the required rate of return is 12% which should be atleast provided by J & M common stock.

c. J & M cost of common stock equity is the same as b that equals to 12%.

answer; /// the above statement is (true);