1. According to the CAPM, what is the market risk premium given an expected return on a security of 20.0%, a stock beta of 1.8, and a risk-free interest rate of 11%?
a. 5.00% b. 19.80% c. 11.00% d. 9.90%
2. A common stock pays an annual dividend per share of $2.20. The risk-free rate is 7% and the risk premium for this stock is 3%. If the annual dividend is expected to remain at $2.20, what is the value of the stock?
Stock value $