Find a stock with estimated beta

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Reference no: EM131850187

Suppose you find a stock with an estimated beta of 1.5, and your broker tells you it is expected to pay 16% next year. Given a risk free rate is 4%, and if the market portfolio is expected to pay 14%, which option (call or put) should you buy in order to make profits on this information? What do you expect the stock price to do when other investors discover what you’ve found? What things do you need to know or must be true before you proceed?

Reference no: EM131850187

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