Question: Based on the following data for AAA stock, what is the implied market risk premium? Dividend just paid, D 0 =$4 10-year Treasury bond yield=6%

Based on the following data for AAA stock, what is the implied market risk premium?

Dividend just paid, D0 =$4

10-year Treasury bond yield=6%

Beta for the stock=1.5

Current market price, P0=$125.71

Constant dividend growth rate=10%

Assume that the stock is priced in equilibrium.

Select one:

a. 5.96%

b. 5.00%

c. 4.12%

d. 6.33%

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