2) 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? b. An investor is buying a firm with an expected perpetual annual cash flow of $100,000 but is unsure of its risk. If he thinks the beta of the firm is 0.5, when in fact the beta is really 1.0. how much more will he offer for the firm than it is truly worth? c. A stock has an expected rate of return of 4%. What is its beta? 2) 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? b. An investor is buying a firm with an expected perpetual annual cash flow of $100,000 but is unsure of its risk. If he thinks the beta of the firm is 0.5, when in fact the beta is really 1.0. how much more will he offer for the firm than it is truly worth? c. A stock has an expected rate of return of 4%. What is its beta