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The Probability Distribution for RM for the Coming Year Is

question 29

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The probability distribution for rM for the coming year is as follows: The probability distribution for r<sub>M</sub> for the coming year is as follows:   If r<sub>RF</sub> = 6.05% and Stock X has a beta of 2.0, an expected constant growth rate of 7 percent, and D<sub>0</sub> = $2, what market price gives the investor a return consistent with the stock's risk? A)  $25.00 B)  $37.50 C)  $21.72 D)  $42.38 E)  $56.94 If rRF = 6.05% and Stock X has a beta of 2.0, an expected constant growth rate of 7 percent, and D0 = $2, what market price gives the investor a return consistent with the stock's risk?

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