Question1. Suppose that the risk free rate of interest is 3 percent and the expected rate of return on the market is 9 percent. A share of stock is selling for $55 at the beginning of the year. It will pay a dividend of $2 per share at the end of the year. Its beta is 1.2. What do investors expect the stock to sell for at the end of the year?
Question2. The risk-free rate is again 3%. The expected return on the market is 9%. A particular security offers an expected return of 2 percent. Assuming that capital markets are in equilibrium, what is the beta of this security?
Question3. What is the difference between systematic risk and nonsystematic risk?