Bond yield is 12% and bond risk premium is 4.5% then cost of common stock would be

The correct answer is C. 16.50%.

The cost of common stock is the expected rate of return that investors require for investing in a company’s stock. It is calculated by adding the risk premium to the risk-free rate of return. The risk premium is the additional return that investors require for investing in a risky asset, such

as a stock, over a risk-free asset, such as a Treasury bond.

In this case, the bond yield is 12% and the bond risk premium is 4.5%. Therefore, the cost of common stock is 12% + 4.5% = 16.50%.

Option

A is incorrect because it is the cost of debt, not the cost of equity. Option B is incorrect because it is the risk-free rate of return, not the cost of equity. Option D is incorrect because it is the cost of debt, not the cost of equity.