If the Risk-Free Rate Is 7%, the Return on the Market

question 8

Multiple Choice

If the risk-free rate is 7%, the return on the market portfolio is 15%, and the beta is 1.5, what is the value of the stock if the current dividend (D₀) is $1.20 and it is expected to grow at a constant rate of 6% per year?

• A) $6.30
• B) $6.70
• C) $9.20
• D) $9.80
• E) $20.00

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