A share has a ßE of 1.2 and sells for a price Po= £50 today. It will pay a dividend di of £6 atthe end of the year. Further assume that rr= 6% and E[rm] = 16%. So, assuming that capitalmarkets are efficient, what will the share's expected price be at the end of the year? Explain.

here we calculate the given by following method given below;

Answered: A share has a BE of 1.2 and sells for a…

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter31: Capital Markets

Section: Chapter Questions

Problem 2E

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A share has a BE of 1.2 and sells for a price Po= £50 today. It will pay a dividend di of £6 at the end of the year. Further assume that rF 6% and E[rM] = 16%. So, assuming that capital markets are efficient, what will the share's expected price be at the end of the year? Explain. %3D