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A share of stock with a beta of 0.80 now sells for $42. Investors expect the stock to pay a year-end dividend of $1.5. The T-bill rate is 3% and the market risk premium is 8%. Suppose investors actually believe that the stock will sell for $45 at year-end. Is the stock a good or bad buy? What will investors do?

Reference no: EM131317888

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