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Business, 29.02.2020 03:42 Lia97

A share of stock is now selling for $100. It will pay a dividend of $9 per share at the end of the year. Its beta is 1. A) What do investors expect the stock to sell for at the end of the year? Assume the risk-free rate is 8% and the expected rate of return on the market is 18%.B) Assume both portfolios A and B are well diversified, that E(rA) = 14% and E(rB) = 14.8%. If the economy has only one factor, and βA = 1 while βB = 1.1, what must be the risk-free rate?

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