next expected dividend for Stock P is 10 and the current price of the stock is P40. The risk free rate is 5%, the market risk premium is 8%, and the stock's beta is 1. What is the expected rate of return? What is the required rate of return? Why should an investor buy this stock?
next expected dividend for Stock P is 10 and the current price of the stock is P40. The risk free rate is 5%, the market risk premium is 8%, and the stock's beta is 1. What is the expected rate of return? What is the required rate of return? Why should an investor buy this stock?
Intermediate Financial Management (MindTap Course List)
13th Edition
ISBN:9781337395083
Author:Eugene F. Brigham, Phillip R. Daves
Publisher:Eugene F. Brigham, Phillip R. Daves
Chapter2: Risk And Return: Part I
Section: Chapter Questions
Problem 15MC
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The next expected dividend for Stock P is 10 and the current price of the stock is P40. The risk free rate is 5%, the market risk premium is 8%, and the stock's beta is 1.
- What is the expected
rate of return ? - What is the required rate of return?
- Why should an investor buy this stock?
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