Assume that the risk-free rate is about 2% and the market risk premium is 8%. If you think Bank of America stock price will rise to $27 per share by the end of the year, at which time it will pay a $1 dividend, and you estimate its beta to be 1.2, what should be the fair price for BOA stock today according CAPM? the stock is currently trading at $24.16, would you buy the stock or not?

Answer rating: 100% (QA)

To calculate the fair price of Bank of America BOA stock using the Capital Asset Pricing Model CAPM ... View the full answer