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Consider the following Information about two stocks (D and E) and two common risk factors (1 and 2): Stock bi bo E(R) D 1.0 3.0

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Consider the following Information about two stocks (D and E) and two common risk factors (1 and 2): Stock bi bo E(R) D 1.0 3.0 13.609 E 24 2.4 16.109 a. Assuming that the risk tree rate is 5.39, calculate the levels of the factor risk premia that are consistent with the reported values for the factor betas and the expected returns for the two stocks. Round your answers to one decimal place A) b. You expect that in one year the prices for Stocks and will be $60 and $36, respectively. Aho, neither stock is expected to pay a dividend over the next year. What should the price of each stock be today to be consistent with the expected return levels listed at the beginning of the problem? Round your answers to the nearest cent Todel's price for Stocks Today's price for Stock : $ Suppou now that the risk premium for Factor 1 that you calculated in Partanuddenly Increased by 0.19% (.from Xto X +0.1519, where x is the value established in Part What are the new expected returns for Stocks and Round your answers to two decimal places Expected room for Stock Expected return for Stock d. If the increase in the factor 1 rok premium in Port does not cause you to change your opinion about what the stock prices will be in one year, what adjustment will be necessary in the current (1. today's prices? Do not found intermediate calculations. Round your answers to the nearest cant Today's price for took DIS Today's price for Stock

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