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Question 13 10 pts The current market prices of stocks A and B are $20 and $30 respectively. Stock A is expected to pay a
Question 13 10 pts The current market prices of stocks A and B are $20 and $30 respectively. Stock A is expected to pay a dividend of $2 per share and stock B does not pay dividends. Yahoo Finance estimates a one-year price target of $25 for A and $33 for B. The beta of A is 3.0 while the beta of B is 1.5. The 10-year Treasury bond yields is 3%. The market risk premium is 6%. Given the above information stock A is overvalued and B is undervalued. both stocks are overvalued. stock A is undervalued and B is overvalued. both stocks are undervalued. Question 14 5 pts Lower expected inflation will lead to a higher risk-free rate due to advantage of higher purchasing power. lower required return on stocks. lower market premium. higher risk premium for a stock
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