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Stock X ' s beta is 1 . 1 5 , the nominal risk - free rate is 3 . 1 percent, and the expected
Stock Xs beta is the nominal riskfree rate is percent, and the expected rate of return on an average stock is percent. The current price on the market for Stock is $ The dividend that was just paid was $ and the stock's expected constant growth rate is percent. Should you buy this stock? Calculate the equilibrium value of the stock and decide if it's worth $
a No based on the SML equation all you should be willing to pay is up to $
b Yes, based on the SML equation all you should be willing to pay is up to $
c Yes, the equilibrium price of the stock is $ so the stock is undervalued for its risk level.
d No the equilibrium price of the stock is $ so the stock is overvalued for its risk level.
e Yes, based on the SML equation all you should be willing to pay is up to $
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