A small company has a cost of equity of 12.5%. The risk-free rate is 4.2%, the market risk premium is 5.0%, and the company's stock has a beta of 1.2. Has any small company "size premium" been assigned?
A) No
B) Yes, the premium is .85%
C) Yes, the premium is 1.25%
D) Yes, the premium is 2.30%
Answer: D