For Problems 17 to 19 assume that the risk-free rate of interest is 6% and the expected rate of return on the market is 16%. 17. A share of stock sells for $50 today. It will pay a dividend of $6 per share at the end of the year Its beta is 1.2. What do investors expect the stock to sell for at the end of the year? 18. I am buying a firm with an expected perpetual cash flow of $1,000 but am unsure of its risk. If I think the beta of the firm is .5, when in fact the beta is really 1, how much more will I offer for the firm than it is truly worth? A stock has an expected rate of return of 4%, what is its beta? Two investment advisers are comparing performance. One averaged a 19% rate of return and the other a 16% rate of return. However, the beta of the first investor was l ,5, whereas that of the second was 1. a. Can you tell which investor was a better selector of individual stocks (aside from the issue of 19, 20. general movements in the market)? b. If the T-bill rate were 6% and the market return during the period were 14%, which investor would be the superior stock selector? c. What if the T-bill rate were 3% and the market return were 15%? Suppose the rate of return on short-term government securities (perceived to be risk-free) is about 5%. Suppose also that the expected rate of return required by the market for a portfolio with a beta of l is 12%. According to the capital asset pricing model: What is the expected rate of return on the market portfolio? h what would be the expected rate of return on a stock with = 0? c. Suppose you consider buying a share of stock at $40. The stock is expected to pay $3 divi- dends next year and you expect it to sell then for $41. The stock risk has been evaluated at =-5. Is the stock overpriced or underpriced