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- Assume a stock pays a perpetual dividend of 2 dollars, has a required rate of return of 9%, a relative bid ask spread of 0.5% and a relative trading frequency of 0.1 (μ=0.1). According to the Amihud and Mendelson (1986) model, the price of the stock would be: a.$22.10 b. $2.00 c. $9.02 d. Other e. $14.50 Give typing answer with explanation and conclusionAssume that you are a consultant to Broske Inc., and you have been provided with the following data: D1 = $0.67 P0 = $27.50; g = 8.00% (constant). Float on new issues is 5% of market price. What is the cost of issuing common stock?3 - Stocks A and B have the following data. Assuming the stock market is efficient and the stocks prices are in equilibrium – i.e. – prices are equal to their intrinsic value, which of the following statements is CORRECT? A B Price $25 $40 Expected growth 7% 9% Expected return 10% 12% The two stocks should have the same expected dividend. The two stocks could not be in equilibrium with the numbers given in the question. A's expected dividend is $0.50. B's expected dividend is $0.75. A's expected dividend is $0.75 and B's expected dividend is $1.20.
- What is the duration of a constant-dividend preferred stock at issuance, when its market rate of return is 4.2%? Note that a constant-dividend preferred stock is just a no-growth perpetuity. Its market rate of return is comparable to the YTM for a bond. Round your calculations to the nearest 0.01, i.e., two decimal places. Also show excel formulaIf the stocks are less risky than bonds, then the risk premium on stock may be zero. Assuming that the risk-free interest rate is 2 percent, the growth rate of dividends is 1 percent and the current level of dividends is $70, use the dividend-discount model to compute the level of the S&P 500 that is warranted by the fundamentals. Compare the result to the current S&P 500 level of 4300, and explain one possible reason for the difference.Using the constant dividend growth model for valuing common stock, if R goes down, Question 24 options: A) P0 will go up. B) P0 will go down.
- A. What is the investor's required rate of return for Green Gadgets' stock? ________% (round to two decimal paces) B. Assuming that the investor's required rate of return for Green Gadget's stock does not change, what would you expect to happen to the price of its common stock if it cuts dividend to $3? $_______ (round to the nearest cent) C. Should Green Gadgeds cut its dividend? ( select from the drop down menus) Green Gadgets Should / Should not cut the dividend because cutting the dividend will increase / decrease the value of the common stock.Just need the correct answer of the following questions no detail explanation: The current price is 40$ and the dividend paid is 10$ what will be the divided yield a. 0.04 b. 25 c. 4 d. 0.25 The paid dividend is 20$ and the current price is 50$ what will be dividend yield? a. 30 b. 40 c. 70 d. 0.4 Which of the following is another name for the required return on a stock? a. discount rate b. value c. retention ratio d. dividend payoutPlease respond to both. You buy a stock when you expect that its price will rise, you short a stock when you expect that its price will fall. True or False. A stock has an expected dividend of $7 and a current price of $74. The required return on the stock is 14%, what is the stock’s capital gain’s yield?
- Assume that the risk-free rate is 2.5% and the market risk premium is 8%. What is the required return for the overall stock market? Round your answer to one decimal place. ? % What is the required rate of return on a stock with a beta of 0.5? Round your answer to one decimal place. ? % The above is a two part question, therefore the second answer is determined based off the first answer provided. Please, please, please do provide both answers.A preferred stock pays a dividend of $2.3. If the required return is 8%, what is the value of the stock? Answer:You ask a stockbroker what the firm’s research department expects for the three (3) stocksabove, that is, Stock X, Y and Z. The broker responds with the following information:Stock Current Price Expected Price Expected Dividend X 22 24 0.75 Y 48 51 2.00 Z 37 40 1.25Required:B. Calculate the estimated future rate of return for Stock X, Y, and Z. C. Determine which stock is overvalued, undervalued, properly valued, and state whyD. Illustrate with the use of the Security Market Line (SML) how Stock X , Y and Z wouldappear on it.