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Question: The market price of a security is $40. Its expected return is 13%. The risk-free rate is 7% and the market risk premium is 8%. What will be the market price of the security if its beta doubles and everything else remains unchanged? Assume the stock is expected to pay a constant dividend in perpetuity. (Hint: First, find dividend amount using price and expected return and then find the new price using dividend and new expected return.)

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Category:- Basic Finance
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