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The probability distribution for Rm the coming year is as follows: Probability Market Return (Rm) 5% 7% 30% 8% 30% 9% 30% 10% 5% 12%

The probability distribution for Rm the coming year is as follows:

Probability Market Return (Rm)
5% 7%
30% 8%
30% 9%
30% 10%
5% 12%

If RRF = 6.05% and Stock X has a beta of 2.0, an expected constant growth rate of 7 percent, and D0 = $2, what market price gives the investor a return consistent with the stock's risk?

$25.00

$37.50

$21.72

$42.38

$56.94

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