The current price of a stock is $20. It is expected to rise to $22 in one

Question:

The current price of a stock is $20. It is expected to rise to $22 in one year and pay an annual dividend of $0.50 during the year. The RF is 5 percent; the ERM is 9 percent, and the stock’s beta is 2.6. Determine whether the stock is overvalued, undervalued, or properly valued. Is the stock above, below, or on the SML?

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...