Good investment for an investor seeking low-risk investment

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Reference no: EM131507255

A broker from Slightly Shady Stocks has contacted you with an investment opportunity: share ownership in a company which will pay a dividend of $12.00 per share for the foreseeable future, i.e. in perpetuity. A friend, who is an independent CFA, has advised that the stock in question has an estimated Beta of 3.85. She has also provided you with the expected return of the market portfolio (12%) and the current risk-free rate (3%).

Shady’s broker is offering the stock at a price of $45.00 per share. Is this a reasonable price for the stock? Would you consider this to be a good investment for an investor seeking a low-risk investment? Why or why not?

Reference no: EM131507255

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