Question

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.)**

Answer #1

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 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: __________

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?

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 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?

Assume that the risk-free rate of interest is 4% and the
expected rate of return on the market is 14%. A share of stock
sells for $55 today. It will pay a dividend of $6 per share at the
end of the year. Its beta is 1.5. What do investors expect the
stock to sell for at the end of the year? (Do not round
intermediate calculations. Round your answer to 2 decimal
places.)

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

Crisp Cookware's common stock is expected to pay a dividend of
$2.5 a share at the end of this year (D1 = $2.50); its beta is 0.7.
The risk-free rate is 4.8% and the market risk premium is 5%. The
dividend is expected to grow at some constant rate g, and the stock
currently sells for $40 a share. Assuming the market is in
equilibrium, what does the market believe will be the stock's price
at the end of 3...

you're thinking of buying a stock priced at $98 per share. Assume
that the risk-free rate is about 4.4% and the market risk premium
is 6.1%. If you think the stock will rise to $115 per share by the
end of the year, at which time it will pay a $2.97 dividend, what
beta would it need to have for this expectation to be consistent
with the CAPM?

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.

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