A stock that sells for $100 entitles you to a dividend payment of $4 today. You estimate
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A stock that sells for $100 entitles you to a dividend payment of $4 today. You estimate that the growth rate of the fi rm’s dividends is about 2 percent per year, and that the risk-free rate is 3½ percent. What is the risk premium suggested by the price of this stock? Does it strike you as high or low? How would your answer change if the stock price were $150 instead of $100?
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Related Book For
Money Banking And Financial Markets
ISBN: 9780073375908
3rd Edition
Authors: Stephen Cecchetti, Kermit Schoenholtz
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