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Question
The probability distribution for rM for the coming year is as follows:
Probability rM
05 7%
30 8
30 9
30 10
05 12
If rRF = 6.05% and Stock X has a beta of 2.0, an expected constant growth rate of 7 percent, and D0 = $2, what market price gives the investor a return consistent with the stock's risk?
a. $25.00
b. $37.50
c. $21.72
d. $42.38
e. $56.94
Answer
This answer is hidden. It contains 183 characters.
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