Suppose you are considering buying a stock. The stock is currently trading for $15. You expect the price in one year to be $16 and it will pay a dividend of $0.75. You estimate the stocks beta at 2, the risk-free rate at 1.5%, and the expected return on the market at 7.5%. According to the CAPM, should you consider purchasing this stock? LO3

A. The required return is 13.5% and the expected return is 11.67%. You should not consider buying the stock.

B. The required return is 11.67% and the expected return is 13.5%. You should consider buying the stock.

C. The required return is 10.68% and the expected return is 11.67%. You should consider buying the stock.

D. The required return is 11.67% and the expected return is 10.68%. You should consider buying the stock.

Suppose you are considering buying a stock. The stock is currently trading for $75. You expect the price in one year to be $78 and it will pay a dividend of $1. What is the dividend yield? LO4

A. 1.33%

B. 1.67%

C. -6.67%

D. 0.833%

Suppose you are considering buying a stock. The stock is currently trading for $75. You expect the price in one year to be $78 and it will pay a dividend of $1. What is the capital gains? LO4

A. 4.00%

B. 4.76%

C. 5.33%

D. -6.67%

Suppose you are considering buying a stock. The stock is currently trading for $25. You expect the price in one year to be $26 and it will pay a dividend of $1.50. You estimate the stocks beta at 1.2, the risk-free rate at 2.1%, and the expected return on the market at 9.25%. According to the CAPM, what is the maximum price you should be willing to pay for this stock? LO3

A. $24.85

B. $28.00

C. $35.15

D. $73.14