Question

Assume that the risk-free rate of interest is 4% and the
expected rate of return on the market is 14%. A share of stock
sells for $55 today. It will pay a dividend of $6 per share at the
end of the year. Its beta is 1.5. What do investors expect the
stock to sell for at the end of the year? **(Do not round
intermediate calculations. Round your answer to 2 decimal
places.)**

Answer #1

a) Assume that the risk-free rate of interest is 4% and the
expected rate of return on the market is 14%. A share of stock
sells for £68 today. It will pay a dividend of £3 per share at the
end of the year. Its beta is 1.2. What do investors expect the
stock to sell for at the end of the year?
b) Suppose that there are two independent economic factors, F1
and F2. The risk-free rate is 6%....

The risk-free rate of return is 4 percent, and the expected
return on the market is 7.1 percent. Stock A has a beta coefficient
of 1.4, an earnings and dividend growth rate of 6 percent, and a
current dividend of $1.50 a share. Do not round intermediate
calculations. Round your answers to the nearest cent.
What should be the market price of the stock?
$
If the current market price of the stock is $45.00, what
should you do?
The...

Consider the following information:
Portfolio
Expected Return
Beta
Risk-free
12
%
0
Market
13.8
1.0
A
11.8
0.9
a. Calculate the expected return of portfolio
A with a beta of 0.9. (Round your answer to 2
decimal places.)
Expected return
%
b. What is the alpha of portfolio A.
(Negative value should be indicated by a minus
sign. Round your answer to 2 decimal
places.)
Alpha
%
c. If the simple CAPM is valid, is the above
situation possible?
Yes...

The risk-free rate of
return is 5.5%, the expected rate of return on the market portfolio
is 14%, and the stock of Xyrong Corporation has a beta coefficient
of 1.9. Xyrong pays out 50% of its earnings in dividends, and the
latest earnings announced were $7.50 per share. Dividends were just
paid and are expected to be paid annually. You expect that Xyrong
will earn an ROE of 18% per year on all reinvested earnings
forever.
a.
What is the...

The risk-free rate of
return is 9.5%, the expected rate of return on the market portfolio
is 16%, and the stock of Xyrong Corporation has a beta coefficient
of 3.0. Xyrong pays out 60% of its earnings in dividends, and the
latest earnings announced were $15 per share. Dividends were just
paid and are expected to be paid annually. You expect that Xyrong
will earn an ROE of 10% per year on all reinvested earnings
forever.
a.
What is the...

The risk-free rate of return is 2 percent, and the expected
return on the market is 7.8 percent. Stock A has a beta coefficient
of 1.7, an earnings and dividend growth rate of 7 percent, and a
current dividend of $3.00 a share. Do not round intermediate
calculations. Round your answers to the nearest cent.
If the beta coefficient falls to 1.4 and the other variables
remain constant, what will be the value of the stock?
$___________
Explain why the...

eBook
Problem 11-06
The risk-free rate of return is 1 percent, and the expected
return on the market is 9 percent. Stock A has a beta coefficient
of 1.5, an earnings and dividend growth rate of 3 percent, and a
current dividend of $2.80 a share. Do not round intermediate
calculations. Round your answers to the nearest cent.
$
The stock -Select-shouldshould notItem 2 be purchased.
$
$
$
The increase in the return on the market
-Select-increasesdecreasesItem 6 the...

Assume that the risk-free rate of interest is 3% and the
expected rate of return on the market is 15%. I am buying a firm
with an expected perpetual cash flow of $1,000 but am unsure of its
risk. If I think the beta of the firm is 0.8, when in fact the beta
is really 1.6, how much more will I offer for the firm
than it is truly worth? (Do not round intermediate
calculations. Round your answer to...

Assume that the risk-free rate of interest is 3% and the
expected rate of return on the market is 15%. I am buying a firm
with an expected perpetual cash flow of $1,000 but am unsure of its
risk. If I think the beta of the firm is 0.8, when in fact the beta
is really 1.6, how much more will I offer for the firm
than it is truly worth? (Do not round intermediate
calculations. Round your answer to...

Assume that the risk-free rate of interest is 5% and the
expected rate of return on the market is 17%. I am buying a firm
with an expected perpetual cash flow of $2,000 but am unsure of its
risk. If I think the beta of the firm is 0.4, when in fact the beta
is really 0.8, how much more will I offer for the firm than it is
truly worth? (Do not round intermediate calculations. Round your
answer to...

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