Assume that you are a portfolio manager, currently evaluating two possible investment. You have gathered following information: Assume that an analysist at a major
Assume that you are a portfolio manager, currently evaluating two possible investment. You have gathered following information: Assume that an analysist at a major brokerage firm have been following the five stocks in the preceding Stock Current price A B C 25 40 33 Expected price Expected dividend 26 42 37 1.00 0.50 1.00 Beta Draw the security market line. plot stock A, B, and C on SML Identify whether securities are under- over or fairly priced. 0.70 1.00 1.15 The average market risk premium for next 1 year is estimate to be 7-% a year while expected rate of return for frisk-free asset (T-bill) about 3%.
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