At the end of 2023, A stock was trading at Rs. 350 per share, while analyst estimated its intrinsic value to be Rs. 400. The required return on equity for A was estimated to be 9% per annum.
Estimate the expected 1 year holding period return on the stock if the market price is expected to converge to intrinsic value in 1 year and also estimate the expected one-year return on the stock if the market price is expected to converge to intrinsic value in 2 years.

Answer rating: 100% (QA)

To estimate the expected 1year holding period return on the stock we need to consider the convergenc... View the full answer