A share of stock with a beta of .78 now sells for $58. Investors expect the stock to pay a year-end dividend of $2. The T-bill rate is 5%, and the market risk premium is 8%.

a.Suppose investors believe the stock will sell for $60 at year-end. Is the stock a good or bad buy? What will investors do?

The stock is agood/bad buy and the investors will invest or will not invest

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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$