Market price of a security

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1. What must be the beta of a portfolio with ErPrfErM () = 8%, if = 4% and () = 8%? (Do not round intermediate calculations. Round your answer to 2 decimal places.)

2. The market price of a security is $65. Its expected rate of return is 12.2%. The risk-free rate is 5%, and the market risk premium is 9.2%. What will be the market price of the security if its correlation coefficient with the market portfolio doubles (and all other variables remain unchanged)? Assume that the stock is expected to pay a constant dividend in perpetuity. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

3. Lotsa Lenses paid a dividend of $1.17 last year and plans a dividend growth rate of 3.40% indefinitely. Lotsa's stock price is now $13.94. What return can Lotsa Lenses' investors expect on their stock? (Do not round intermediate calculations. Round your answer to 2 decimals.)

Reference no: EM133072703

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