Question
Answered step-by-step

XYZ, Inc. currently trades at $30 per share and has an equity beta

of 2. The 1-year Treasury bill rate is 2% and the market risk premium (the expected return on the market portfolio in excess of the risk-free rate) is 5%. If XYZ pays no dividend, what is its expected price per share in 1 year?
Hint: Use CAPM to calculate the required return on the stock and use that rate to estimate the stock price in 1 year.


a.$30.60 per share


b.$33.60 per share


c.$30.00 per share


d.$31.50 per share

Answer & Explanation
Verified Solved by verified expert
Rated Helpful

Fusce dui lectus, congue ve

ec facilisis. Pellentesque dapibus efficitur laoreet. Nam risus ante, dapibus a molestie consequat, ultrices ac magna. Fusce dui lectus, congue vel laoreet ac, dictum vitae odio. Donec aliquet. Lorem ipsum dolor sit amet, consectetur adipiscing elit. Nam lacinia pulvinar tortor nec facilisis. P

Unlock full access to Course Hero

Explore over 16 million step-by-step answers from our library

Subscribe to view answer
Step-by-step explanation

iscing elit. Nam lacinia pulvinar tortor nec facilisis. Pellentesqu


trices ac magna. Fusce dui lectus, congue vel la


molestie consequat, ultrices ac magna. Fusc

usce dui lectus, congue vel laoreet ac, dictum vitae odio. Donec aliquet. Lorem ipsum dolor sit amet, consectetur adipiscing
Student reviews
100% (5 ratings)

"Thank you so much! it was very well explained an easy to follow through"

Other answer

amet, consectetur adipisci

cing elit. Nam lacinia pulvinar tortor nec facilisis. Pellentesque dapibus efficitur laoreet. Nam risus ante, dapibus a molestie consequat, ultrices ac magna. Fusce dui lectus, congue vel laoreet ac, dictum vitae odio. Donec aliquet. Lorem ipsum dolor sit amet, consectetur adipis

Unlock full access to Course Hero

Explore over 16 million step-by-step answers from our library

Subscribe to view answer
Step-by-step explanation

, consectetur adipiscing elit. Nam lacinia pul

ia pulvinar tortor nec facilisis. Pellentesque dapibus efficitur laoreet. Nam risus ante, dapibus a molestie consequ

ipiscing elit. Nam lacinia pulvinar tortor nec facilisis. Pellentesq

or nec facilisis. P

gue vel laoreet

Donec a

usc

, ultrices ac magna. Fusce dui lectus, congue vel

usce dui lectus, congue vel laoreet ac, d

ac,

Student review
100% (1 rating)