Question
Assume that the risk-free rate is about 2% and the market risk premium is 8%. If you think Bank of America stock price will rise
Assume that the risk-free rate is about 2% and the market risk premium is 8%. If you think Bank of America stock price will rise to $27 per share by the end of the year, at which time it will pay a $1 dividend, and you estimate its beta to be 1.2, what should be the fair price for BOA stock today according CAPM? the stock is currently trading at $24.16, would you buy the stock or not?
Step by Step Solution
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Step: 1
To calculate the fair price of Bank of America BOA stock using the Capital Asset Pricing Model CAPM ...
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Fundamentals Of Corporate Finance
Authors: Jonathan Berk, Peter DeMarzo, Jarrad Harford
5th Global Edition
1292437154, 978-1292437156
