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asap Information. The risk-free rate of return (r) is 4% and the expected market rate of return (rm) is 10%. The shares X, and Y,
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Information. The risk-free rate of return (r) is 4% and the expected market rate of return (rm) is 10%. The shares X, and Y, both pay a dividend (D) of $5 a year. The betas for the two shares are , = 0.75 and By = 1.25. The two shares are trading at the same price (P) of $50. Requirements. Answer the following questions: Q1. What are the expected returns on X and Y? Q2. What are the expected prices of X and Y? Q3. What action would you recommend for X? Q4. What action would you recommend for Y? Q5. What would be the expected price of X if its dividend were $7? (Total 5 marks) Step by Step Solution
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