Question: Consider three stocks: Q, R and S. ku Beta STD (annual) Forecast for Nov 20084 Dividend - Stock Price Q4 0.45 35% $0.50 $45 R

 Consider three stocks: Q, R and S. ku Beta STD (annual)

Consider three stocks: Q, R and S. ku Beta STD (annual) Forecast for Nov 20084 Dividend - Stock Price Q4 0.45 35% $0.50 $45 R 1.45 40% 02 $75 SH -0.20 40% $1.00 $20 Q5. See the table above: Use a risk-free rate of 2.0% and an expected market return of 9.5%. The market's standard deviation is 18%. Assume that the next dividend will be paid after one year, at t = 1.4 (a) According to the CAPM, what is the expected rate of return of each stock? (b) What should today's price be for each stock, assuming the CAPM is correct

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