CAPM and Expected Return. A stock with a beta of $.75$ currently sells for $$50.$ Investors

expect the stock to pay a year$-$end dividend of $$2.$ The T$-$bill rate is $4\%,$ and the market risk

premium is $7\%.($LO$12-2)$

a$.$ Suppose investors believe the stock will sell for $$52$ at year$-$end. Is the stock a good or bad

buy? What will investors do$?$

b$.$ At what price will the stock reach an "equilibrium" at which it is perceived as fairly priced today?