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the risk free rate is 5% and the market rate of return is 8%. Stock A has a beta value =0.5. Required: (A). Draw the

the risk free rate is 5% and the market rate of return is 8%. Stock A has a beta value =0.5.

Required:

(A). Draw the Security Market Line (SML) clearly indicating the risk free asset, market and stock A.(B) Stock A beginning price is K50 and during the year paid a dividend of k3 with a maturity value of k55. Show using an empirical evidence weather stock A is undervalued, overvalued of fairly valued.[8marks]

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