Ask Question, Ask an Expert

+1-415-315-9853

info@mywordsolution.com

Ask Basic Finance Expert

problem: A share of stock with a beta of 0.75 now sells for 50 dollar. Investors expect the stock to pay a year-end dividend of 2 dollar. The Treasury bill rate is 4%, and the market risk premium is 7%. The stock is perceived to be fairly priced today. Assume investors actually believe the stock will sell for dollar 54 at year-end. Is the stock a good or bad purchase? Find what will investors do? At what point will the stock reach an ‘equilibrium’ at which it again is perceived as fairly priced?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M920717

Have any Question? 


Related Questions in Basic Finance

Conseco inc has a debt ratio of 055 what are the companys

Conseco, Inc., has a debt ratio of 0.55. What are the company's debt-to-equity ratio and equity multiplier?(Round your answers to 2 decimal places, e.g.12.25.)

Questionsuppose there are 3 stocks with the same expected

Question: Suppose there are 3 stocks with the same expected return of 10% per year and the same risk (standard deviation) of 50%. The correlation between any 2 of them is 0.5. 1) What is the risk of equal-weighted portfo ...

Which of the following statements about the linear

Which of the following statements about the linear regression of the return of a portfolio over the return of its benchmark presented below are correct? Portfolio Parameter Value Beta 1.25 Alpha 0.26 Coefficient of deter ...

Three months ago you purchased a put option on nole stock

Three months ago, you purchased a put option on Nole stock with a strike price of $60 and an option price of $1.02. The option expires today when the value of Nole stock is $62.79 Ignoring trading costs and taxes, what i ...

Wy are voids filled with lightweight infilling

Why are voids filled with lightweight infilling material in raft foundation of pumping stations?

A companys free cash flow was just fcf0 150 million the

A company's free cash flow was just FCF0= $1.50 million. The weighted average cost of capital is WACC = 10.1%, and the constant growth rate is g = 4.0%. What is the current value of operations?

If the current short- term rate is 5 percent and the

If the current short- term rate is 5 percent and the current long- term rate is 4 percent, what is the expected short- term interest rate? (Use the expectations theory)

Inflation was 8 percent during the most recent year and

Inflation was 8 percent during the most recent year and your organization's investment in land rose 12 percent. If the beginning appraised land value was $1,000,000, what increase in specific prices over general price le ...

Link through the text web site to the site of planet rating

Link through the text Web site to the site of Planet Rating, a French organization that calls itself "the global microfinance rating agency." What is the main function of Planet Rating? How might its work help the microf ...

Assignmentreturn on investment education fundingdevelop a

Assignment Return on Investment: Education Funding Develop a three- to four-page analysis (excluding the title and reference pages) on the projected return on investment for your college education and projected future em ...

  • 4,153,160 Questions Asked
  • 13,132 Experts
  • 2,558,936 Questions Answered

Ask Experts for help!!

Looking for Assignment Help?

Start excelling in your Courses, Get help with Assignment

Write us your full requirement for evaluation and you will receive response within 20 minutes turnaround time.

Ask Now Help with Problems, Get a Best Answer

A cola-dispensing machine is set to dispense 9 ounces of

A cola-dispensing machine is set to dispense 9 ounces of cola per cup, with a standard deviation of 1.0 ounce. The manuf

What is marketingbullwhat is marketing think back to your

What is Marketing? • "What is marketing"? Think back to your impressions before you started this class versus how you

Question -your client david smith runs a small it

QUESTION - Your client, David Smith runs a small IT consulting business specialising in computer software and techno

Inspection of a random sample of 22 aircraft showed that 15

Inspection of a random sample of 22 aircraft showed that 15 needed repairs to fix a wiring problem that might compromise

Effective hrmquestionhow can an effective hrm system help

Effective HRM Question How can an effective HRM system help facilitate the achievement of an organization's strate