Problem $12-16$ CAPM and Expected Return $($LO$2)$

A share of stock with a beta of $0\mathrm{.}76$ now sells for $$51.$ Investors expect the stock to pay a year$-$end dividend of $$2.$ The T$-$bill rate is $3\%,$ and the market risk premium is $7\%.$

a$.$ Suppose investors believe the stock will sell for $$53$ at year$-$end. Calculate the opportunity cost of capital. Is the stock a good or bad buy? What will investors do$?$

b$.$ At what price will the stock reach an "equilibrium" at which it is perceived as fairly priced today?

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Required $A$

Suppose investors believe the stock will sell for $$53$ at year$-$end. Calculate the opportunity cost of capital. Is the stock a good or bad buy? What will investors do$?$

Note: Do not round intermediate calculations. Round your opportunity cost of capital calculation as a percentage rounded to $2$ decimal places.

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$\backslash$table$[[$Opportunity cost of capital,,$\%$