A share of stock with a beta of .71 now sells for $61. Investors expect the stock
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Question:
A share of stock with a beta of .71 now sells for $61. Investors expect the stock to pay a year-end dividend of $3. The T-bill rate is 4%, and the market risk premium is 7%. |
a. | Suppose investors believe the stock will sell for $63 at year-end. Is the stock a good or bad buy? What will investors do? |
The stock is a(Click to select)goodbadbuy and the investors(Click to select)will investwill not invest. |
b. | At what price will the stock reach an "equilibrium" at which it is perceived as fairly priced today?(Do not round intermediate calculations. Round your answer to 2 decimal places.) |
Stock price | $ |
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