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5. Security B has a price of $50 and a beta of 0.8. The risk-free rate is 3% and the market risk premium is 1%.

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5. Security B has a price of $50 and a beta of 0.8. The risk-free rate is 3% and the market risk premium is 1%. (a) According to the CAPM, what return do investors expect on the security? (b) Investors expect the security not to pay any dividend next year. At what price do investors expect the security to trade next year? (c) At what price do investors expect the security to trade next year, if the expected dividend next year is $1 instead of zero

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