Price of Stock and Value of Beta Assignment | Homework For You
January 29th, 2020
Problem 5 (10 marks). Assume that the risk-free rate of interest is 6% and the expected rate of return on the market is 16%.
a) A share of stock sells for $50 today. It will pay a dividend of $6 per share at the end of the year. Its beta is 1.2.
What do investors expect the stock to sell for at the end of the year? (5 marks)
b) A stock has an expected rate of return of 4%. What is its beta? (5 marks)
Problem 5:
a) HPR formula;
b) CAPM formula. Get Finance homework help today