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If the risk-free interest rate is 5 percent, and the current market value of this stock is $42, is this stock underpriced or overpriced? If
If the risk-free interest rate is 5 percent, and the current market value of this stock is $42, is this stock underpriced or overpriced? If the stock is underpriced or overpriced how much? If the stock is overpriced, enter your answer as a negative number. Assume that the stock is expected to pay $1.5 dividends and the end of year price of the stock is expected to be $48.9. Scenario Market Stock A Risk-free rate Bust -0.12 -0.15 0.05 Normal 0.18 0.3 0.05 Boom 0.36 0.45 0.05 Expected dividend Current stock price 42 Expected stock price 48.9 1.5 If the risk-free interest rate is 5 percent, and the current market value of this stock is $42, is this stock underpriced or overpriced? If the stock is underpriced or overpriced how much? If the stock is overpriced, enter your answer as a negative number. Assume that the stock is expected to pay $1.5 dividends and the end of year price of the stock is expected to be $48.9. Scenario Market Stock A Risk-free rate Bust -0.12 -0.15 0.05 Normal 0.18 0.3 0.05 Boom 0.36 0.45 0.05 Expected dividend Current stock price 42 Expected stock price 48.9 1.5
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