In December 1995, Boise Cascade’s stock had a beta of 0.95. The treasury bill rate at the time was 5.8% and the treasury bond rate was 6.4%.
a. Estimate the expected return on the stock for a short term investor in the company.
b. Estimate the expected return on the stock for a long term investor in the company.
c. Estimate the cost of equity for the company.