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The current price of stock A (B) is $87.20 ($62.50). Analysts expect that in one year a dividend of $3.64 ($3.12) will b
Posted: Sun Jul 03, 2022 6:42 am
by answerhappygod
- The Current Price Of Stock A B Is 87 20 62 50 Analysts Expect That In One Year A Dividend Of 3 64 3 12 Will B 1 (52.55 KiB) Viewed 11 times
The current price of stock A (B) is $87.20 ($62.50). Analysts expect that in one year a dividend of $3.64 ($3.12) will be paid on stock A (B). In addition, analysts expect the price of stock A (B) in one year to be $93.50 ($67.80). Stock A (B) has a beta of 0.90 (1.30). The risk-free rate is 4.0% and the expected return on the market is 11.0%. 4 pts a. What is the expected return on stock A given its current price and analysts' expectations? b. Given the required return from CAPM, what current stock price for stock B would we expect? c. What is the alpha for stock B? d. Is stock A overvalued or undervalued? Explain/demonstrate.