If the risk-free rate is 1 and the overall equity market, Ask an Expert

Economics

Best Bank enjoys steady earnings growth of 10%, the payout ratio is constant and the bank has a beta coefficient of 2.0. The last dividend payment was 6 cents.

(a) If the risk-free rate is 1% and the overall equity market risk premium is 10%. What price was a Best Bank share trade at in an efficient market?

(b) What happens to the price if the equity market risk rises to 11%?

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Microeconomics, Economics

Category:- Microeconomics
Reference No.:- M958344

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