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Suppose that the risk-free rate is 4% and that the expected return required by the market for a portfolio with a beta of 1 is
Suppose that the risk-free rate is 4% and that the expected return required by the market for a portfolio with a beta of 1 is 12%. Suppose you consider buying a share of stock at a price of $40. The stock is expected to pay a dividend of $3 next year and to sell then for $41. The stock risk has been evaluated at beta =0.5. Is the stock overpriced or underpriced? Type in 1 for overprice and 2 for underprice
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