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4 Suppose you have the following information about a stock: Expected Return begin{tabular}{|r|c|} hline D0= & $3.00 hline P0= & $45 hline g=

image text in transcribed 4 Suppose you have the following information about a stock: Expected Return \begin{tabular}{|r|c|} \hline D0= & $3.00 \\ \hline P0= & $45 \\ \hline g= & 2.0% \\ \hline \end{tabular} Required Return \begin{tabular}{|r|c|} \hlinerff= & 2% \\ \hlinerm= & 10% \\ \hlineb= & 0.9 \\ \hline \end{tabular} Callculate the expected return on a stock, use the Constant Dividend Growth model in your analysis. Next, calculate the required return on a stock using the Security Market Line (SML) formula. With that background in mind, address the following questions. a) Is this stock in equilibrium? Explain your reasoning. b) If it is not in equilibrium, determine the equilibrium price. Expected return rs=D0(1+g)/P0+grs= Required Return rs=rrf+b(rmrrf)rs= b. Expected return

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