A share of stock with a beta of .75 now sells for $50. Investors expect the stock to pay a year-end dividend of $2. The T-bill rate is 4 percent, and the market risk premium is 7 percent. If the stock is perceived to be fairly priced today, what must be investors' expectation of the price of the stock at the end of the year?© BrainMass Inc. brainmass.com June 3, 2020, 10:48 pm ad1c9bdddf
First calculate the expected growth rate for the stock using the ...
This solution shows step-by-step calculations to determine the required rate on stock using the CAPM method as well as the stock prices at the end of the year.