Question: The current price of a stock is 20 It is
The current price of a stock is $20. It is expected to rise to $22 in one year and pay an annual dividend of $0.50 during the year. The RF is 5 percent; the ERM is 9 percent, and the stock’s beta is 2.6. Determine whether the stock is overvalued, undervalued, or properly valued. Is the stock above, below, or on the SML?
Relevant QuestionsSuppose you have a portfolio that has $100 in stock A with a beta of 0.9, $400 in stock B with a beta of 1.2, and $300 in the risk-free asset. You have another $200 to invest. You wish to achieve a beta for your whole ...Stock A has a beta of 1.8 and an expected return of 20 percent. Stock B has a beta of 1.2 and an expected return of 14 percent. If CAPM holds, what should the return on the market and the risk-free rate be?Which of the following are examples of systematic (market) risks? Which are examples of unsystematic (unique) risks?a. Inflation riskb. CFO’s fraudulent activitiesc. Changes in interest ratesd. Product tamperinge. ...The Health Bracelet Company will need 1,000 kg of copper in one year and is trying to decide between buying the copper on the spot market and using a forward contract. The spot price of copper is $15 per kilogram. The ...An investor enters into a long position in 50,000 futures contracts that requires a $50,000 initial margin and has a maintenance margin that is 75 percent of this amount. The futures price associated with this contract is ...
Post your question