Question
Financial analysts forecast that ABC Corps stock price will be $100 per share one year from today. The three-month T-bill rate is 5% and the
Financial analysts forecast that ABC Corps stock price will be $100 per share one year from today. The three-month T-bill rate is 5% and the expected return to the market portfolio is 10%, determine how much you would pay for a share of ABC Corp stock today if:
(a) The beta of the company is 0.8.
(b) Without any numerical calculation, discuss whether the share price will be higher or lower than in (a) if the beta of ABC Corp is 2.
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Principles Of Managerial Finance
Authors: Lawrence J. Gitman, Chad J. Zutter
14th Global Edition
9781292018201
