Recently you have received a tip that the stock of Bubbly Incorporated is going to rise from $57 to $61 per share over the next year. You know that the annual return on the
S&P 500 has been 9.25 percent and the 90-day T-bill rate has been yielding 3.75 percent
per year over the past 10 years. If beta for Bubbly is 0.85, will you purchase the stock?

b. No, because it is overvalued.

Step-by-step explanation:

Check for the Required return first which according to CAPM is;

= risk-free rate + beta(market return - risk free rate)

= 3.75% + 0.85(9.25% - 3.75)

= ‭0.08425‬

= 8.43%

Then calculate the Expected return;

= (New price + dividends - Old price) / Old price

= (61 - 57) / 57

= 0.070175

= 7.02%

The Expected return is lower than the Required return for this stock. This means that the stock is overvalued and so you should not buy it.

b

step-by-step explanation:

answer: f = 32.2m

step-by-step explanation: that is the answer