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The market price of a security is $46. Its expected rate of return is 10%. The risk-free r

The market price of a security is $46. Its expected rate of return is 10%. The risk-free r

The market price of a security is $46. Its expected rate of return is 10%. The risk-free rate is 4%, and the market risk premium is 9%. What will the market price of the security be if its beta doubles (and all other variables remain unchanged)? Assume the stock is expected to pay a constant dividend in perpetuity. (Recall that the formula for the present value of a perpetuity is PV = CF/r.)

Abhinav 30-Nov-2019

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