question archive Want clarification Fallweather Enterprises stock has an expected return of 6
Want clarification Fallweather Enterprises stock has an expected return of 6
Subject:FinancePrice:2.86 Bought22
Want clarification
Fallweather Enterprises stock has an expected return of 6.5 percent and a beta of 0.5. The
market return is 12.5 percent and the risk-free rate is 2.8 percent. This stock is ______ because the CAPM return for the stock is ______ percent.
is this 7.65 undervalued or overvalued?
The maximum option payoff for buying a put is:
Unlimited
Strike price
stock price
none of these
I know payoff for a put is strike price minus premium paid so is it strike price or none of these?
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1.
CAPM return=risk free rate+beta*(market return-risk free rate)=2.8%+0.5*(12.5%-2.8%)=7.6500%
This stock is overvalued
2.
Strike price
