Mr. Patel expects the stock of A to sell for Rs. 70/- a year from now and to pay Rs. 4/­dividend. If the stock’s correlation with the Market is C0.3, and the standard deviation of A is 40% and standard deviation of the Market is 20% and the risk free rate of return is 5% and the market risk premium is 5%, what would be the price of stock A be now?

Mr. Patel expects the stock of A to sell for Rs. 70/- a year from now and to pay Rs. 4/­dividend. If the stock’s correlation with the Market is C0.3, and the standard deviation of A is 40% and standard deviation of the Market is 20% and the risk free rate of return is 5% and the market risk premium is 5%, what would be the price of stock A be now?
A . 74
B . 73.65
C . 72.55
D . 75.65

View Answer

Answer: C