Question: Problem 12-16 CAPM and Expected Return (LO2) A share of stock with a beta of 0.73 now sells for $50. Investors expect the stock to

Problem 12-16 CAPM and Expected Return (LO2) A share of stock

Problem 12-16 CAPM and Expected Return (LO2) A share of stock with a beta of 0.73 now sells for $50. Investors expect the stock to pay a year-end dividend of $4. The T-bill rate is 6%, and the market risk premium is 9%. a. Suppose investors believe the stock will sell for $52 at year-end. Calculate the opportunity cost of capital. Is the stock a good or bad buy? What will investors do? (Do not round intermediate calculations. Round your opportunity cost of capital calculation as a percentage rounded to 2 decimal places.) Answer is complete but not entirely correct. Opportunity cost of capital The stock is a bad 12.00 X % will not invest buy and the investors

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