Currently, Treasury bills yield 4.75 percent and the market prices risk at 6.90 percent. You have invested

Question:

Currently, Treasury bills yield 4.75 percent and the market prices risk at 6.90 percent. You have invested in a stock efficiently priced by the CAPM with a beta of 1.15 that will pay an expected dividend of $1.80 in one year. If the stock expects no capital appreciation in value over the next year, compute its current price.

Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...

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