Suppose the risk-free rate of return is 3.5 percent and the market risk premium is 7 percent. Stock

U

, which has a beta coefficient equal to 1.3 , is currently selling for

$37

per share. The company is expected to grow at a 4 percent rate forever, and the most recent dividend paid to stockholders was

$2.75

per share. Is Stock U correctly priced? Explain. Do not round intermediate calculations. Round your answers to one decimal place. The required rate of return, that is

%

, is

the expected rate of return, that is

%

, which means that