Question

The beta for Eastman Kodak is 1.10. The current six-month treasury bill rate is 3.25%, while the thirty year bond rate is 6.25%. The market risk premium for T-Bills and T-Bonds are 8.41% and 5.50% respectively. Estimate the cost of equity for Eastman Kodak, based upon (a) using the treasury bill rate as your risk-free rate.

(b) using the treasury bond rate as your risk-free rate.

Answer 1

Answer:

using the treasury bond rate as your risk-free rate.