Constant growth model and CAPM

| January 31, 2015

2. Stocks A and B have the following data. The market risk premium is 6.0% and the risk-free rate is 6.4%. Assuming the stock market is efficient and the stocks are in equilibrium, which of the following statements is CORRECT?

A B
Beta 1.10 0.90
Constant growth rate 7.00% 7.00%

a. Stock A must have a hi…

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CAPM Stock valuation
Market risk premium and CAPM

Category: Coursework, critical Thinking

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