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Cost of Equity The cost of equity is the rate of return that shareholders expect to earn from their investment in a company. It is a key component in calculating the cost of capital and is used to determine the expected return on equity investments. Formula: The cost of equity can be calculated using the following formula: Ke = Rf + β(Rm - Rf) Where: Ke = cost of equity Rf = risk-free rate (e.g. the return on a government bond) β = beta of the company (a measure of its systematic risk) Rm = expected market return (the average return of the overall stock market) Example: Suppose the risk-free rate is 6%, the expected market return is 12%, and the beta of the company is 1.2. Then, the cost of equity would be: Ke = 6% + 1.2(12% - 6%) = 6% + 1.2(6%) = 6% + 7.2% = 13.2% This means that investors expect to earn a return of at least 13.2% from their investment in the company. Importance: The cost of equity is important because it: Helps companies determine the expected return on equity invest...

            I saw that students are unclear about #PDF [probability density function] and #CDF [cumulative density function]. I would be glad to provide a comprehensive explanation of probability density functions ( PDFs ) and cumulative distribution functions ( CDFs ), incorporating the best aspects of the previous responses and addressing any potential shortcomings: Probability Density Function ( PDF ): A PDF is a mathematical function that describes the probability distribution of a continuous random variable. It represents the likelihood of a random variable taking on a particular value within a certain range. The PDF is always non-negative and its integral over its entire range must equal 1. For a continuous random variable X, the PDF is denoted as f(x). The probability of X falling within a certain range [a, b] is given by the integral of the PDF over that range: P(a ≤ X ≤ b) = ∫[a, b] f(x) dx. Cumulative Distribution Function ( CDF ): A CDF is...