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(a) CAPM postulates the nature of the relationship between the expected return and the systematic risk of a security. Explain. (b) A chemical company paid
- (a) CAPM postulates the nature of the relationship between the expected return and the systematic risk of a security. Explain.
(b) A chemical company paid a dividend of Rs. 2.75 during the current year. Forecast suggests that earnings and dividends of the company are likely to grow at the rate of 8% over the next 5 years and at a rate of 5% thereafter. Investors have traditionally expected a rate of return of 20% on these shares. What is the present value of stock?
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