Question

Gareth owns 1 share of stock A and 1 share of stock B. In 1 year from today, the total value of his holdings is expected to be 175.63 dollars. Stock A is currently priced at 88.06 dollars, has an expected return of 10.62 percent, and is expected to pay a dividend of 4.38 dollars in 1 year from today. Stock B is currently priced at 82.11 dollars and is expected to pay a dividend of 6.11 dollars in 1 year from today. What is the expected return for stock B? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098.

Answer #1

Given that,

Gareth owns 1 share of stock A and 1 share of stock B

In one year, total value = $175.63

current price of stock A Pa = $88.06

Current price of stock B Pb = $82.11

expected dividend for stock A, Da = $4.38

expected dividend for stock b, Db = $6.11

Expected return of stock A ra = 10.62%

So, price of stock A at year 1, is PA1 = (Pa*(1+ra) - Da) = (88.06*1.1062 - 4.38 = $93.03

Similarly, price of stock B at year a is PB1 = (Pb*(1+rb) - Db) = (82.11*(1+rb) - 6.11)

So, equating total value, we get

93.03 + (82.11*(1+rb) - 6.11) = 175.63

=> rb = 8.04%

So, Expected return on stock B is 8.04%

Demarius owns investment A and 1 share of stock B. The total
value of his holdings is 2,443.27 dollars. Investment A is expected
to pay annual cash flows to Demarius of 380 dollars per year with
the first annual cash flow expected later today and the last annual
cash flow expected in 6 years from today. Investment A
has an expected annual return of 11.56 percent. Stock B is expected
to pay annual dividends of 37.01 dollars forever with the...

Demarius owns investment A and 1 share of stock B. The total
value of his holdings is 2,196.22 dollars. Investment A is expected
to pay annual cash flows to Demarius of 250 dollars per year with
the first annual cash flow expected later today and the last annual
cash flow expected in 6 years from today. Investment A has an
expected annual return of 11.01 percent. Stock B is expected to pay
annual dividends of 43.2 dollars forever with the...

Chaz owns investment A and 1 share of stock B. The total value
of his holdings is $350. Stock B is expected to be priced at $90.32
in 2 years, is expected to pay dividends of $12.32 in 1 year and
$15.93 in 2 years, and has an annual expected return of 9.60
percent. Investment A has an expected return of R and is expected
to pay $63 per year for a finite number of years such that its
first...

Goran owns one share of stock of Platinum Water Packaging and
one share of stock of White Mountain Health. The total value of his
holdings is 211.44 dollars. Both stocks pay annual dividends that
are expected to continue forever. The expected return for Platinum
Water Packaging stock is 13.45 percent and its annual dividend is
expected to remain at 8.97 dollars forever. What is the expected
return for White Mountain Health stock if its next dividend is
expected to be...

1. Youssef owns 1 share of stock A and 1 share of stock B. In 1
year from today, the total value of his holdings is expected to be
173.48 dollars. Stock A is currently priced at 99.64 dollars, has
an expected return of 12.93 percent, and is expected to pay a
dividend of 4.17 dollars in 1 year from today. Stock B has an
expected return of 12.97 percent and is expected to pay a dividend
of 6.29 dollars...

Tim owns one share of stock A and one share of stock B. In one
year from today, the total value of his holdings is expected to be
$144. Stock A is currently priced at $59.76 has an expected return
of 5.40 percent and is expected to pay a dividend of $3.74 in one
year from today. Stock B has an expected return on 12.03 percen and
is expected to pay a dividend of $4.89 in one year from today....

Norma has one share of stock and one bond. The total value of
the two securities is 1,321.7 dollars. The stock pays annual
dividends. The next dividend is expected to be 4.55 dollars and
paid in one year. In two years, the dividend is expected to be 8.18
dollars and the stock is expected to be priced at 102.07 dollars.
The stock has an expected return of 14 percent per year. The bond
has a coupon rate of 10.9 percent...

What was the real rate of return over the past year (from one
year ago to today) for a stock if the inflation rate over the past
year was 3.36 percent, the risk-free return over the past year was
5.58 percent, the stock is currently priced at 68.57 dollars, the
stock was priced at 63.28 dollars 1 year ago, and the stock just
paid a dividend of 1.19 dollars? Answer as a rate in decimal format
so that 12.34% would...

What is the current share price of Indigo River Consulting stock
if it is expected to pay a dividend of 4.92 dollars every quarter
forever, the stock’s expected return is 8.16 percent per year, and
the next dividend is expected in 3 months? What is the expected
dividend for Indigo River Consulting expected to be in 3 months if
the stock is expected to pay a constant dividend every quarter
forever, the expected return is 17.24 percent per year, the...

Arjen owns investment A and 1 bond B. The total value of his
holdings is 1,157 dollars. Investment A is expected to pay annual
cash flows to Arjen of 128.37 dollars per year with the first
annual cash flow expected later today and the last annual cash flow
expected in 3 years from today. Investment A has an expected return
of 16.42 percent. Bond B pays semi-annual coupons, matures in 19
years, has a face value of $1000, has a...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 24 minutes ago

asked 36 minutes ago

asked 37 minutes ago

asked 50 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago