Question

A share of stock with a beta of 0.84 now sells for $69. Investors expect the...

A share of stock with a beta of 0.84 now sells for $69. Investors expect the stock to pay a year-end dividend of $4. The T-bill rate is 3%, and the market risk premium is 7%. a. Suppose investors believe the stock will sell for $71 at year-end. Calculate the opportunity cost of capital. Is the stock a good or bad buy? What will investors do?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
A share of stock with a beta of 0.84 now sells for $59. Investors expect the...
A share of stock with a beta of 0.84 now sells for $59. Investors expect the stock to pay a year-end dividend of $4. The T-bill rate is 3%, and the market risk premium is 6%. If the stock is perceived to be fairly priced today, what must be investors’ expectation of the price of the stock at the end of the year? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
3. A share of stock with a beta of 0.69 now sells for $50. Investors expect...
3. A share of stock with a beta of 0.69 now sells for $50. Investors expect the stock to pay a year-end dividend of $4. The T-bill rate is 6%, and the market risk premium is 9%. a. Suppose investors believe the stock will sell for $52 at year-end. Calculate the opportunity cost of capital. Is the stock a good or bad buy? What will investors do? (Do not round intermediate calculations. Round your opportunity cost of capital calculation as...
A share of stock with a beta of 0.81 now sells for $56. Investors expect the...
A share of stock with a beta of 0.81 now sells for $56. Investors expect the stock to pay a year-end dividend of $4. The T-bill rate is 4%, and the market risk premium is 7%. If the stock is perceived to be fairly priced today, what must be investors’ expectation of the price of the stock at the end of the year? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
A share of stock with a beta of 0.70 now sells for $60. Investors expect the...
A share of stock with a beta of 0.70 now sells for $60. Investors expect the stock to pay a year-end dividend of $4. The T-bill rate is 5%, and the market risk premium is 8%. A. At what price will the stock reach an “equilibrium” at which it is perceived as fairly priced today? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Stock Price: __________
stock A has a beta of 0.5 and investors expect it to return 5%. on the...
stock A has a beta of 0.5 and investors expect it to return 5%. on the other hand, stock B has a beta of 1.5 and investors expect it to return 10% use the CAPM to find: 1.The market risk premium 2.The Expected rate of return on the market.
A share of stock sells for $53 today. The beta of the stock is 0.7 and...
A share of stock sells for $53 today. The beta of the stock is 0.7 and the expected return on the market is 16 percent. The stock is expected to pay a dividend of $1.00 in one year. If the risk-free rate is 5.2 percent, what should the share price be in one year?
Suppose a share of stock is selling for $100. It plans to pay cash dividend of...
Suppose a share of stock is selling for $100. It plans to pay cash dividend of $1 per share at the end of this year. Its beta is 1. What price will investors expect the stock to sell for at the end of the year? (the risk-free rate is 4% and the expected rate of return on the market is 8%). PLEASE SHOW ALL STEPS
You want to buy a share of Pear's stock. As a shareholder, you can expect an...
You want to buy a share of Pear's stock. As a shareholder, you can expect an annual dividend of $3.50 and $3.60 at the end of years 1 and 2, respectively. Also, you can sell Pear's stock for $25.00 at the end of year 2. With the required rate of return 12%, how much are you willing to pay to buy this stock now?
A share of stock sells for $65 today. The beta of the stock is 1.5, and...
A share of stock sells for $65 today. The beta of the stock is 1.5, and the expected return on the market is 12%. The stock is expected to pay a dividend of $1.50 in one year. With the risk free rate of return 3.41%, what will the share price be in one year, just after the dividend is paid? Select one: A. 75.09 B. 72.59 C. 76.09 D. 75.59 E. 74.09
Steady As She Goes, inc. will pay a year-end dividend of $2 per share investors expect...
Steady As She Goes, inc. will pay a year-end dividend of $2 per share investors expect that dividend to grow at a rate of 5% indefinitely. a. if the stock currently sells for $40 per share,what is the rate of return on the stock? b. if the expected rate of return on the stock is 15.5% what is the stock price?
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT