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6.8. [2-S00:4] The Capital Asset Pricing Model is assumed to hold. A share of a firm's stock is expected to have a value of 40
6.8. [2-S00:4] The Capital Asset Pricing Model is assumed to hold. A share of a firm's stock is expected to have a value of 40 one year from now. No dividends are paid and the beta coefficient is less than 1.0. The market conditions are such that the rate of return on the market is 13% and the risk-free asset rate of return is 5%. Which of the following is/are true? I. The current price of the stock is at least 35.40. II. If beta increases, the current price of the stock increases. III. If the risk-free asset rate of return increases, the current price of the stock decreases. (A) II only (B) I and II only (C) I and III only (D) II and III only (E) I, II, and III
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