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You are considering purchasing some shares of CNB Inc. to add to your portfolio. The stock is currently quoted at $64 in the market. Your
You are considering purchasing some shares of CNB Inc. to add to your portfolio. The stock is currently quoted at $64 in the market. Your research has provided you with the following information:
- The stock of recently paid a dividend of $2.29 per share.
- Dividends are expected to grow at a rate of 1.25% forever.
- Based on past returns, the standard deviation of CNB Inc. is 16%.
- The stock has a correlation of .30 with returns to the overall market.
- The S&P/TSX Composite Index has a standard deviation of 12%.
- Historically, the market has returned 9.25% more than T-bills in an average year.
- The current yield on T-Bills is 1%.
Based on your analysis, should you purchase shares of CNB? Show your work.
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