Consider the Data in Table 17 $\Delta$ P^s/p^s Is the Growth Rate of the Stock Price

question 87

Essay

Consider the data in Table 17.1 below, which shows the relevant data for six firms' stocks: GE, Apple, Bank of America, Exxon, Pfizer, and Home Depot. R^F is the risk-free rate and $\Delta$ p^s/p^s is the growth rate of the stock price. Additionally, the table has the actual market price of each stock (p_M) in September 2016. Use the stock price arbitrage equation to calculate the no-arbitrage price of the stock. Given your answer, should you buy the stock or put the money into a safe asset?Table 17.1: Relevant Stock Data
(Source: Morningstar [9/1/2016])

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