Security B has a price of $35 and a beta of 1.4. The risk-free rate is...
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Security B has a price of $35 and a beta of 1.4. The risk-free rate is 5% and the market risk premium is 6%. (a) According to the CAPM, what return do investors expect on the security? (b) Investors expect the security not to pay any dividend next year. At what price do investors expect the security to trade next year? (c) At what price do investors expect the security to trade next year, if the expected dividend next year is $2 instead of zero? Security B has a price of $35 and a beta of 1.4. The risk-free rate is 5% and the market risk premium is 6%. (a) According to the CAPM, what return do investors expect on the security? (b) Investors expect the security not to pay any dividend next year. At what price do investors expect the security to trade next year? (c) At what price do investors expect the security to trade next year, if the expected dividend next year is $2 instead of zero?
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Related Book For
Income Tax Fundamentals 2013
ISBN: 9781285586618
31st Edition
Authors: Gerald E. Whittenburg, Martha Altus Buller, Steven L Gill
Posted Date:
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