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Stock a Has a Current Price of $25

Question 115

Essay

Stock A has a current price of $25.00,a beta of 1.25,and a dividend yield of 6%.If the Treasury bill yield is 5% and the market portfolio is expected to return 14%,what should stock A sell for at the end of an investor's 2-year investment horizon?

Correct Answer:

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Expected return = 5% + 1.25 (14% - 5%)
=...

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