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The risk of stock ABC has been evaluated at = 1.4. Suppose the rate of return on three month T-bill is about 5%. Suppose also
The risk of stock ABC has been evaluated at = 1.4. Suppose the rate of return on three month T-bill is about 5%. Suppose also that the market risk premium is 14%. The stock is fairly priced. If there is a market crash, and the market risk premium doubles, all else equal, how will the stock price change?
Attention: if the price decrease, you should get a negative number.
Round your answer to 4 decimal places. For example if your answer is 3.205%, then please write down 0.0321.
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