5 pts Question 13 Phoenix Solar is expected to pay a dividen

5 pts Question 13 Phoenix Solar is expected to pay a dividend of $3.60 in the upcoming year, and their stock is trading in the market today at $60 per share. Dividends are expected to grow at the rate of 5.2% per year. If the risk free rate of return is 4% and the expected return on the market portfolio is 12%, what is the stock\'s beta? Your answer should be between 0.34 and 2.12. rounddy to 2 decimal places, with no special characters.

Solution

Expected return on stock = Expected dividend/ stock price + growth rate = 3.6/60 + 5.2%= 11.2%

Beta = (expected return - risk free rate)/ (market return - risk free rate) = (11.2% - 4%)/(12% - 4%) = 0.9