The current price of stock W (Z) is $144.50 ($210.00) Analysts expect that in one year...

 

Transcribed Image Text:

The current price of stock W (Z) is $144.50 ($210.00) Analysts expect that in one year a dividend of $5.60 ($4.80) will be paid on stock W (Z). In addition, analysts expect the price of stock W (Z) in one year to be $161.30 ($237.75). Stock W (Z) has a beta of 1.10 (1.50). The risk-free rate is 3.5% and the market risk premium is 8.0% 4 pts a. Given the required return from CAPM, what current stock price for W would we expect? b. What is the alpha for Z? The current price of stock W (Z) is $144.50 ($210.00) Analysts expect that in one year a dividend of $5.60 ($4.80) will be paid on stock W (Z). In addition, analysts expect the price of stock W (Z) in one year to be $161.30 ($237.75). Stock W (Z) has a beta of 1.10 (1.50). The risk-free rate is 3.5% and the market risk premium is 8.0% 4 pts a. Given the required return from CAPM, what current stock price for W would we expect? b. What is the alpha for Z?

Answer rating: 100% (QA)

answer a Expected Price for Stock W using CAPM We can use the Capital Asset Pricing Model CAPM to estimate the expected price of Stock W based on the ... View the full answer