Question

A share of stock with a beta of 0.84 now sells for $69. Investors expect the stock to pay a year-end dividend of $4. The T-bill rate is 3%, and the market risk premium is 7%. a. Suppose investors believe the stock will sell for $71 at year-end. Calculate the opportunity cost of capital. Is the stock a good or bad buy? What will investors do?

Answer #1

A share of stock with a beta of 0.84 now sells for $59.
Investors expect the stock to pay a year-end dividend of $4. The
T-bill rate is 3%, and the market risk premium is 6%. If the stock
is perceived to be fairly priced today, what must be investors’
expectation of the price of the stock at the end of the year?
(Do not round intermediate calculations. Round your answer
to 2 decimal places.)

3. A share of stock with a beta of 0.69 now sells for $50.
Investors expect the stock to pay a year-end dividend of $4. The
T-bill rate is 6%, and the market risk premium is 9%. a. Suppose
investors believe the stock will sell for $52 at year-end.
Calculate the opportunity cost of capital. Is the stock a good or
bad buy? What will investors do? (Do not round intermediate
calculations. Round your opportunity cost of capital calculation as...

A share of stock with a beta of 0.81 now sells for $56.
Investors expect the stock to pay a year-end dividend of $4. The
T-bill rate is 4%, and the market risk premium is 7%. If the stock
is perceived to be fairly priced today, what must be investors’
expectation of the price of the stock at the end of the year? (Do
not round intermediate calculations. Round your answer to 2 decimal
places.)

A share of stock with a beta of 0.70 now sells for $60.
Investors expect the stock to pay a year-end dividend of $4. The
T-bill rate is 5%, and the market risk premium is 8%.
A. At what price will the stock reach an “equilibrium” at which
it is perceived as fairly priced today? (Do not round
intermediate calculations. Round your answer to 2 decimal
places.)
Stock Price: __________

stock A has a beta of 0.5 and investors expect it to return 5%.
on the other hand, stock B has a beta of 1.5 and investors expect
it to return 10% use the CAPM to find:
1.The market risk premium
2.The Expected rate of return on the market.

A share of stock sells for $53 today. The beta of the stock is
0.7 and the expected return on the market is 16 percent. The stock
is expected to pay a dividend of $1.00 in one year. If the
risk-free rate is 5.2 percent, what should the share price be in
one year?

Suppose a share of stock is selling for $100. It plans to pay
cash dividend of $1 per share at the end of this year. Its beta is
1. What price will investors expect the stock to sell for at the
end of the year? (the risk-free rate is 4% and the expected rate of
return on the market is 8%). PLEASE SHOW ALL STEPS

You want to buy a share of Pear's stock. As a shareholder, you
can expect an annual dividend of $3.50 and $3.60 at the end of
years 1 and 2, respectively. Also, you can sell Pear's stock for
$25.00 at the end of year 2.
With the required rate of return 12%, how much are you willing
to pay to buy this stock now?

A share of stock sells for $65 today. The beta of the stock is
1.5, and the expected return on the market is 12%. The stock is
expected to pay a dividend of $1.50 in one year. With the risk free
rate of return 3.41%, what will the share price be in one year,
just after the dividend is paid?
Select one:
A. 75.09
B. 72.59
C. 76.09
D. 75.59
E. 74.09

Steady As She Goes, inc. will pay a year-end dividend
of $2 per share investors expect that dividend to grow at a rate of
5% indefinitely.
a. if the stock currently sells for $40 per share,what is the rate
of return on the stock?
b. if the expected rate of return on the stock is 15.5% what is the
stock price?

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