A stock with a beta of 1.8 just paid a dividend $1.60 that is expected to grow at 6%. If the risk-free rate is 2% and the market risk premium is 5.5%, what should be the price of the stock today? A. $28.75. B. $27.12. C. $27.12. D. $69.57.
A stock with a beta of 1.8 just paid a dividend $1.60 that is expected to grow at 6%. If the risk-free rate is 2% and the market risk premium is 5.5%, what should be the price of the stock today? A. $28.75. B. $27.12. C. $27.12. D. $69.57.
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 2P: AA Corporations stock has a beta of 0.8. The risk-free rate is 4%, and the expected return on the...
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![A stock with a beta of 1.8 just paid a dividend $1.60 that is
expected to grow at 6%. If the risk-free rate is 2% and the
market risk premium is 5.5%, what should be the price of the
stock today?
A. $28.75.
B. $27.12.
C. $27.12.
D. $69.57.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fab1e865e-ed99-42bb-8d6b-fb036a653054%2Fa6c5a3d0-0577-44db-a427-04d246a68d2b%2Fsb2jlti_processed.jpeg&w=3840&q=75)
Transcribed Image Text:A stock with a beta of 1.8 just paid a dividend $1.60 that is
expected to grow at 6%. If the risk-free rate is 2% and the
market risk premium is 5.5%, what should be the price of the
stock today?
A. $28.75.
B. $27.12.
C. $27.12.
D. $69.57.
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