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You are considering buying a stock that you believe pays $5 in dividends a year forever. a. Suppose you believe that the beta of the

You are considering buying a stock that you believe pays $5 in dividends a year forever. a. Suppose you believe that the beta of the stock is 0.4. How much is the stock worth if the risk free rate is 4% and the expected rate of return on the market portfolio is 11%? b. By how much will you overvalue the stock if its beta is actually 0.6?

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