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Question
two stocks each pay a $1 dividend that is growing annually at 8 percent. stock a has a beta of 1.3; stock b's beta is 0.8.
a. which stock is more volatile?
b. if treasury bills yield 6 percent and you expect the market to rise by 12 percent, what is your riskadjusted required rate of return?
c. using the dividendgrowth model, what is the maximum amount you would be willing to pay for each stock?
d. why are your valuations different?
Answer
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