1. Right now the price of Netflix stock is $100, its beta with the market is...

 

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1. Right now the price of Netflix stock is $100, its beta with the market is 2. The expected price next year is $120. The risk free rate is 2% and the market risk premium is 8%.< a. If Winston (the representative investor) believes CAPM correctly describes the risk return tradeoff, will he be willing to buy Netflix stock at the current price? i. Yes, Winston will buy exactly the amount supplied ii. Yes, but Winston will demand more than the amount supplied at $100 iii. No, Winston will not buy Netflix at $1004 iv. Not enough information b. If CAPM holds and assuming its beta stays constant, at what price will Winston demand Netflix in an amount exactly equal to supply. (hint: what price today would correctly reflect the CAPM risk?) 1. Right now the price of Netflix stock is $100, its beta with the market is 2. The expected price next year is $120. The risk free rate is 2% and the market risk premium is 8%.< a. If Winston (the representative investor) believes CAPM correctly describes the risk return tradeoff, will he be willing to buy Netflix stock at the current price? i. Yes, Winston will buy exactly the amount supplied ii. Yes, but Winston will demand more than the amount supplied at $100 iii. No, Winston will not buy Netflix at $1004 iv. Not enough information b. If CAPM holds and assuming its beta stays constant, at what price will Winston demand Netflix in an amount exactly equal to supply. (hint: what price today would correctly reflect the CAPM risk?)

Answer rating: 100% (QA)

Answers to Netflix Stock Valuation Questions a Will Winston buy Netflix stock at 100 No Winston will ... View the full answer