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WWF Inc.'s preferred stock pays $12 per share, its beta is 1.2. If the risk-free rate...

WWF Inc.'s preferred stock pays $12 per share, its beta is 1.2. If the risk-free rate is .04 and the market risk premium is .08, what is the expected price of the stock?

Please explain steps, thank you.

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Answer #1

Expected return = risk free rate + beta * market risk premium

= 0.04 + 1.2 * 0.08

= 13.6%

=>

Expected price = 12/0.136

= 88.24

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