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Today, Bell stock is trading at $52 per share, which is expected to rise to $55 per share by the end of a year from
- Today, Bell stock is trading at $52 per share, which is expected to rise to $55 per share by the end of a year from today. The dividend per share to be paid on the stock at the year-end is $1.00. The stocks beta is 0.8, the expected market return is 14%, and the risk-free interest rate is 4%. Is there an arbitrage opportunity?
- Yes
- No
- You are holding an all-equity financed portfolio valued at $21,000. The portfolios beta is 0.9. How can your portfolio be levered to have a beta of 1.2.?
- By a $10,000 increase in current investment in the portfolio
- By borrowing $7,000 to increase the current investment in the portfolio
- By borrowing $4,200 to increase the current investment in the portfolio
- By investing $10,000 in T-bills in addition to the current investment in the portfolio
- None of the above.
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