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The market risk premium is 8 % and the risk - free rate is 3 % . The beta of stock XYZ is 1 and

The market risk premium is

8 %

and the risk

-

free rate is

3 % .

The beta of stock XYZ is

1

and the company is expected to pay a $

0.50

dividend indefinitely. If the market risk premium suddenly decreases to

7 %

what is the impact on the price of XYZ

?

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