The risk-free rate is 7% The market risk premium (Rm-Rf) is 8% The following information is availabl
Posted: Thu May 19, 2022 5:30 am
The risk-free rate is
7%
The market risk premium (Rm-Rf) is
8%
The following information is available on stocks A
and B:
Stock A
Stock B
Beta
1.20
0.80
Expected
dividend
next year
$1.00
$1.75
Growth
rate (g)
7.00%
4.00%
Current
Price (p0)
$20.00
$35.00
a. Would you recommend purchasing or selling the
stocks? Explain
b. At what prices will you change your
recommendation from buy or sell to "hold?"
7%
The market risk premium (Rm-Rf) is
8%
The following information is available on stocks A
and B:
Stock A
Stock B
Beta
1.20
0.80
Expected
dividend
next year
$1.00
$1.75
Growth
rate (g)
7.00%
4.00%
Current
Price (p0)
$20.00
$35.00
a. Would you recommend purchasing or selling the
stocks? Explain
b. At what prices will you change your
recommendation from buy or sell to "hold?"