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The current price of a stock with a beta of 1.27 is $142. The stock is expected to pay a dividend of $6.8 next year.
The current price of a stock with a beta of 1.27 is $142. The stock is expected to pay a dividend of $6.8 next year. Assume that the expected return on a well-diversified portfolio with a beta of 1 is 16% and risk free rate is 3%. What is the forecast (holding period) return if the stock is expected to sell in one year for $164 per share? Whether the stock is underpriced or overpriced?
A. 17.6%, overpriced
B. 20.3%, underpriced
C. 17.6%, underpriced
D. 20.3%, overpriced
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