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A share of stock with a beta of .69 now sells for $50. Investors expect the stock to pay a year-end dividend of $4. The T-bill rate is 6%, and the market risk premium is 9%

a. Suppose investors believe the stock will sell for $52 at year-end. Is the stock a good or bad buy? What will investors do?

b. At what price will the stock reach an "equilibrium" at which it is perceived as fairly priced today?

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