Given the data below for the Zoom Corporation,you should
1.Beta = 0.8
2.Expected price appreciation = 15%
3.Market risk premium = 8%
4.Risk free rate = 4%
5.Next year's dividend = $1.00
6.Current market price = $50

Question

Quizplus · Accepted Answer

We can use the capital asset pricing model (CAPM) to calculate the required return for the stock:
Required return = risk-free rate + beta * market risk premium
Required return = 4% + 0.8 * 8% = 10.4%

The expected return on the stock is given as 15%. Since the expected return exceeds the required return, it makes sense to buy the stock. Therefore, the best choice is A: buy the stock.

Given the Data Below for the Zoom Corporation,you Should