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Assume the CAPM holds. Consider the annual information in Table 2 . The annual risk - free rate of 2 % . The market standard
Assume the CAPM holds. Consider the annual information in Table The annual riskfree rate of The market standard deviation is
Table
Stock A: Expected Return Standard deviation
Stock B: Expected Return Standard deviation
a Stock A is expected to pay no dividends for the next years. In year it is expected to pay $ per year every year. Stock B is expected to pay a dividend of $ next year growing at per year. Compute the price of the stocks today.
b Stock A has a beta of what is the beta of stock B
c What portfolio delivers the lowest possible standard deviation for an investor
who requires an expected return of What is the standard deviation of this
portfolio? Compare it with Stock As standard deviation.
d Compute the nonarbitrage price of a forward contract to deliver stock A in
years.
Please solve asap with correct answers.
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