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The current price of a stock is $92 per share. The stock has a beta of 1.2 and will pay a dividend of $4 per
The current price of a stock is $92 per share. The stock has a beta of 1.2 and will pay a dividend of $4 per share in the next year. The expected return on the market portfolio is 7%, and the risk-free rate is 2%. Your estimate of the stock price in the next year is $99. What is the alpha of the stock according to the capital asset pricing model (CAPM)?
Note: Write your answer in decimal (3 or more decimal places). For example, write 0.011 instead of 1.1%.
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