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The market price of a security is $50. Its expected rate of return is 10%. The risk-free rate is 5%, and the market risk
The market price of a security is $50. Its expected rate of return is 10%. The risk-free rate is 5%, and the market risk premium is 8%. What will the market price of the security be if its beta doubles (and all other variables remain unchanged)? Assume the stock is expected to pay a constant dividend in perpetuity. (Round your answer to 2 decimal places.) What is the original beta of the security at a market price of $50? What is the new beta after it doubles? What is the new required rate of return for the security given the new beta? % What is the dividend amount that the firm pays? S What would be the new market price of the security after the beta has doubled? S
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Answer To calculate the new market price of the security after its beta doubles we can use the Capital Asset Pricing Model CAPM formula R Rf betaRm Rf ...Get Instant Access to Expert-Tailored Solutions
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