The following information is given about stock G and the market:

Risk free rate is 9%

Expected rate of return on an average stock is 13%

Beta coefficient for stock G is 0.4

Current Price of stock G is $30.00

Growth rate is 5%

Next expected dividend is $1.75

Required:

a) Is the stock price in equilibrium?Explain.

(Show all calculations to support your answer)

b) Considering your answer to part a),

What will investors do?

What will occur in the market?