## Answers

Risk free rate, Rf 4% Expected market return . Rm-11% Beta of stock- 0.85 Expected dividend, D1$2.40 Growth rate, g 4 Required return of stock, RR - Rf + Beta * (Rm - Rf) 400 + 0.85 * ( 1190-490) -490 + 0.85 * 7% -9.95% Current price of stock, PO D1/ (RR- g = $2.40 / ( 9.95%-4%) $2.40 / 5.95% $40.3361345 S40.34 (Rounded)

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