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The market risk premium is 8% and the risk-free rate is 0%. Holders of stock XYZ expect to receive a $0.50 dividend indefinitely and the

The market risk premium is 8% and the risk-free rate is 0%. Holders of stock XYZ expect to receive a $0.50 dividend indefinitely and the beta of stock XYZ is 2. If over time the beta of stock XYZ decreases to 1.5, what is the impact on the price of XYZ stock?

a.

33.33% increase

b.

4% increase

c.

25% increase

d.

no change

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