The market price of a security is $90. Its expected rate of return is 12%. The risk-free rate is 6% and the market risk premium is 9.6%. What will be the market price of the security if its correlation coefficient with the market portfolio doubles (and all other variables remain unchanged)? Assume that the stock is expected to pay a constant dividend in perpetuity. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

The market price of a security is $90. Its expected rate of return is 12%. The risk-free rate is 6% and the market risk premium is 9.6%. What will be the market price of the security if its correlation coefficient with the market portfolio doubles (and all other variables remain unchanged)? Assume that the stock is expected to pay a constant dividend in perpetuity. (Do not round intermediate calculations. Round your answer to 2 decimal places.)

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 7P

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