What is the expected rate of return of stock

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Consider three stocks

 

Beta

Standard deviation

Dividend

Stock price

Q

0,45

35 %

0,5

45

R

1,45

40 %

0

75

S

-0,2

40 %

1

20

Use a risk free rate of 2% and an expected market return of 9.5%. The standard deviation of the market returns is 18%. Assume that the next dividend will be paid after one year, at t= 1. 

1. According to CAPM, what is the expected rate of return of each stock and What should today's price be for each stock, assuming CAPM is correct? 

Reference no: EM133056744

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