The market price of a security is $92. Its expected rate of return is 20.1%. The...
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The market price of a security is $92. Its expected rate of return is 20.1%. The risk-free rate is 3%, and the market risk premium is 6.4%. What will be the market price of the security if its correlation coefficient with the market portfolio doubles (and all other variables remain unchanged)? Assume that the stock is expected to pay a constant dividend in perpetuity. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Market price The market price of a security is $92. Its expected rate of return is 20.1%. The risk-free rate is 3%, and the market risk premium is 6.4%. What will be the market price of the security if its correlation coefficient with the market portfolio doubles (and all other variables remain unchanged)? Assume that the stock is expected to pay a constant dividend in perpetuity. Note: Do not round intermediate calculations. Round your answer to 2 decimal places. Market price
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The information provided indicates that we are dealing with the Capital Asset Pricing Model CAPM which describes the relationship between systematic r... View the full answer
Related Book For
Financial Theory and Corporate Policy
ISBN: 978-0321127211
4th edition
Authors: Thomas E. Copeland, J. Fred Weston, Kuldeep Shastri
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