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What is the required return for stock a

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Reference no: EM133122655

Question - Stock A has just paid a dividend of $2.35 per share. Dividends are expected to grow to constant rate of 3% per year forever. The covariance between the returns of stock and the market overall is 0.005892 the risk-free rate of interest is 3.5% and the market risk premium is 4%.

a. Calculate the beta for Stock A assuming the standard deviation of the market is 6%.

b. What is the required return for Stock A using the CAPM model (SML).

c. Based upon the required return in part b, what should the price of StockA be?

d. Would you recommend holding, buying, or selling Stock A if the current market price is $35.9?

Reference no: EM133122655

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