Question

What are the components of the required rate of return on a share of stock? Briefly explain each component.

Answer #1

The components of the required rate of return on a share of stock are the following-

**The Dividend yield**- It refers to the amount of dividend expressed in the form of percentage of a current share price. The dividend yield measures the annual percentage of income returns on the stock.**The Capital gains yield**- It refers to the percentage appreciation in the price on an investment. It is measured as the increase or appreciation in the price of the investment as divided by its cost of acquisition. This is represented as a percentage of price. A yeild is defined as an appreciation whereas a decrease or loss is definded as a depreciation.

What is the difference between the required rate of return and
the expected rate of return?
According to the scenario using the analysis of the current
growth model for the required rate of return and the excepted rate
of return we were asked if we could give the investors a 15% return
CAPM We used beta as an estimate number which gave us a benchmark
TF wanted to know the value of their stock and keep in mind admin
changes...

BETA AND REQUIRED RATE OF RETURN
a. A stock has a required return of 11%; the risk-free rate is
5%; and the market risk premium is 5%. What is the stock's beta?
Round your answer to two decimal places.
b. If the market risk premium increased to 10%, what would
happen to the stock's required rate of return? Assume that the
risk-free rate and the beta remain unchanged.
If the stock's beta is less than 1.0, then the change in...

Briefly describe how you can estimate a stock's required rate
of return.

Suppose you know a company's stock currently sells for $60 per
share and the required return on the stock is 10 percent. You also
know that the total return on the stock is evenly divided between a
capital gains yield and a dividend yield.
If it's the company's policy to always maintain a constant
growth rate in its dividends, what is the current dividend per
share?
Multiple Choice
$2.71
$5.71
$3.05
$2.86
$3.00

Find a fair stock price if the current dividend is $4.00 per
share, required return on equity is 12% and growth rate in future
dividends is 3.5%.

A preferred stock has a dividend of $6.50. The required rate of
return is 12.00%. What is the price of the preferred
stock?

If the required rate of return is higher than the dividend rate
of a preferred share, the par value is _______________ the current
market value of the preferred share.
equal to
less than
higher than
independent of

Briefly discuss the relationship between the following: (Word
limit 50-70 words)
Share price and investors required rate of return
Share price and divided growth rate

BETA AND REQUIRED RATE OF RETURN
A stock has a required return of 12%; the risk-free rate is 7%;
and the market risk premium is 3%.
What is the stock's beta? Round your answer to two decimal
places.
If the market risk premium increased to 7%, what would happen
to the stock's required rate of return? Assume that the risk-free
rate and the beta remain unchanged.
If the stock's beta is equal to 1.0, then the change in
required rate...

Beta and required rate of return
A stock has a required return of 11%; the risk-free rate is 7%;
and the market risk premium is 3%.
What is the stock's beta? Round your answer to two decimal
places.
If the market risk premium increased to 9%, what would happen
to the stock's required rate of return? Assume that the risk-free
rate and the beta remain unchanged.
If the stock's beta is greater than 1.0, then the change in
required rate...

ADVERTISEMENT

Get Answers For Free

Most questions answered within 1 hours.

ADVERTISEMENT

asked 1 minute ago

asked 15 minutes ago

asked 15 minutes ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 1 hour ago

asked 2 hours ago

asked 2 hours ago

asked 3 hours ago

asked 3 hours ago

asked 3 hours ago