A share of stock with a beta of .85 now sells for $58. Investors expect the stock to pay a year-end dividend of $2. The T-bill rate is 4%, and the market risk premium is 7%.

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 a (Click to select) good bad buy and the investors (Click to select) will invest will 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 $