The current market price of Walters is 60 per share, its expected return is 13%, the riskless
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Question:
The current market price of Walters is £60 per share, its expected return is 13%, the riskless rate of interest is 12%, and the market risk premium [E(Rm - Rf)] is 9%. Suppose the expected future payoff of Walters remains the same but the covariance of its rate of return with the market portfolio doubles. Based on the CAPM, answer the following questions (show all the details of your calculation, explain intermediate results, and show your results with 4 decimal places).
i. What is Walter's rate of return?
ii. What is Walter's current price?
Related Book For
Financial Reporting Financial Statement Analysis and Valuation
ISBN: 978-0324302950
6th edition
Authors: Clyde P. Stickney
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