Perceived risk on stock is lower

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Assume that you require a 15% return on stocks. Compute the price of a stock that will pay a $1 dividend next year and is expected to sell for $20 in a year’s time. If your “perceived risk” on a stock is lower, will your required return be higher or lower than 15%? If your perceived risk is lower, will you want to pay a higher or lower price for the stock compared to your answer on the first part?

Reference no: EM131379127

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