Stock Z is currently selling for $16.72.It has just paid an annual dividend of $0.80 per share, which is expected to grow at 4.5% indefinitely.The risk-free rate is 6%.The expected return on the market portfolio is 14% with a standard deviation of 17%.
a)What is the expected return on Stock Z?
b)Is Stock Z overpriced, underpriced, or correctly priced if it has a beta of 0.6?
c)Is Stock Z above, below, or on the SML?
d)What is the equilibrium price of Stock Z? Assume the dividend grow rate remains at 4.5 %.

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The Answer of Stock Z is currently selling for $16.72.It has just paid an annual dividend of $0.80 per share, which is expected to grow at 4.5% indefinitely.The risk-free rate is 6%.The expected return on the market portfolio is 14% with a standard deviation of 17%.
a)What is the expected return on Stock Z?
b)Is Stock Z overpriced, underpriced, or correctly priced if it has a beta of 0.6?
c)Is Stock Z above, below, or on the SML?
d)What is the equilibrium price of Stock Z? Assume the dividend grow rate remains at 4.5 %.

Stock Z Is Currently Selling for $16