We used CAPM to determine a theoretically appropriate required rate of return of a stock A.
If the E(Ri) from CAPM is 10%. In the real market, E(R) = 12%.
We can say the the price of stock A is undervalued. (From CFA1, don't know if it's plausible in the real world equity market analysis)
Questions:
1. What does the E(Ri) really represent. Say if a stock is $10 in t1. It's expected to be $11 in t2 with E(Ri) =10% ?
2. Why stock A is undervalued? An explanation is that it's related to discounted cash flow. Is it about the r-g in DDM model?
Trending Content
| +152 | How to stop feeling like shit for not making it in IB? | 57 | 4h | |
| +115 | If Tik Tok is forced to sell, what banks do you think would be involved in the deal? | 58 | 3h | |
| +80 | Updated LA Banking Scene (2024) | 57 | 4h | |
| +38 | Ranking banks that went under | 20 | 8h | |
| +34 | Burnt Out M&A ASO | 18 | 6h | |
| +32 | A strategy for SA applicants late to the game like myself | 15 | 15h | |
| +29 | Relevance of A-Levels for U.K. London recruiting | 21 | 21h | |
| +26 | Series 79 Help / Tips to Pass The First Attempt | 11 | 2d | |
| +26 | Intern Ettiquette | 4 | 17h | |
| +23 | What are hours like at BBs in London? | 47 | 17h |
Career Resources
Possimus dolores aut et sit velit. Aut doloribus est ipsa pariatur qui eaque.
Adipisci aperiam maxime corrupti aliquam. Repudiandae minus molestias numquam sed. Voluptates facere eveniet natus voluptatibus exercitationem voluptatibus. Sunt nulla magnam at rem.
Modi et quia laudantium dolorem quam. Error dicta et ipsum rerum ducimus voluptas. Velit distinctio nihil earum dolor iste qui illo.
A nihil laboriosam nisi omnis saepe omnis. Iste porro qui explicabo. Dolorem voluptatem officia veniam at ea ipsam a.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...