9. A stock with a beta of 1.5 currently priced at $50 is expected to increase in price to $56 by year- end and pay a $1 dividend. The expected market retum is 15%, and the risk-free rate is 8%. The stock is: A. overpriced, so do not buy it. B. underpriced, so buy it. C. properly priced, so buy it. 10. The risk-free rate is 6%, and the expected market return is 15%. A stock with a beta of 1.2 is selling for $25 and will pay a $1 dividend at the end of the year. If the stock is priced at $26 at year-end, it is: A. overpriced, so short it. B. underpriced, so buy it. C. underpriced, so short it.
9. A stock with a beta of 1.5 currently priced at $50 is expected to increase in price to $56 by year- end and pay a $1 dividend. The expected market retum is 15%, and the risk-free rate is 8%. The stock is: A. overpriced, so do not buy it. B. underpriced, so buy it. C. properly priced, so buy it. 10. The risk-free rate is 6%, and the expected market return is 15%. A stock with a beta of 1.2 is selling for $25 and will pay a $1 dividend at the end of the year. If the stock is priced at $26 at year-end, it is: A. overpriced, so short it. B. underpriced, so buy it. C. underpriced, so short it.
Chapter8: Risk And Rates Of Return
Section: Chapter Questions
Problem 17PROB
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Transcribed Image Text:9. A stock with a beta of 1.5 currently priced at $50 is expected to increase in price to $56 by year-
end and pay a $1 dividend. The expected market return is 15%, and the risk-free rate is 8%. The
stock is:
A. overpriced, so do not buy it.
B. underpriced, so buy it.
C. properly priced, so buy it.
10. The risk-free rate is 6%, and the expected market return is 15%. A stock with a beta of 1.2 is
selling for $25 and will pay a $1 đividend at the end of the year. If the stock is priced at $26 at
year-end, it is:
A. overpriced, so short it.
B. underpriced, so buy it.
C. underpriced, so short it.
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