Homework Answers
Beta of market=1;Beta of risk-free assets=0
Hence beta of stock=(1*0.4)=0.4
Expected rate=risk free rate+Beta*market risk premium
=2+(8*0.4)=5.2%
Current price=D1/(Required return-Growth rate)
=(2*1.03)/(0.052-0.03)
=$93.64(Approx).
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