A share of stock with a beta of 0.78 now sells for $58. Investors expect the stock to pay a year-end dividend of $2. The T-bill rate is 5%, and the market risk premium is 8%. a. Suppose investors believe the stock will sell for $60 at year-end. Calculate the opportunity cost of capital. Is the stock a good or bad buy? What will investors do? b. At what price will the stock reach an "equilibrium" at which it is perceived as fairly priced today?

Suppose that your estimates of the possible one-year returns from investing in the common stock of the AYZ Corporation were as follows:   Probability of occurrence 0.15 0.25 0.3 0.15 0.15 Possible return -10% 5% 20% 35% 50%   What are the expected return? Calculate the standard deviation?

2. Answer both questions:            a. You purchase 100 shares of stock for $40 a share. The stock pays a $2 per share dividend at year-end. What is the rate of return on your investment if the year-end stock prices turn out to be $38, $40, and $42? What is your real (inflation-adjusted) rate of return in each case, assuming an inflation rate of 3%?            b. Consider the following information on the returns on stock and bond investment.           Scenario Profitability Stocks Bonds Recession .2 -5% +14% Normal Economy .6 +15% +8% Boom .2 +25% +4%                      i) Calculate the expected rate of return and standard deviation in each investment.                      ii) Do your results support or contradict the historical record on the relationship between risk and return in the financial market in both Canada and the United States?                     iii) Which investment would you prefer? Explain your answer.

Suppose you have $375,000 in​ cash, and you decide to borrow another $63,750 at a 7% interest rate to invest in the stock market. You invest the entire $438,750 in a portfolio J with a 20% expected return and a 28% volatility. a. What is the expected return and volatility​ (standard deviation) of your​ investment? b. What is your realized return if J goes up 39% over the​ year? c. What return do you realize if J falls by 19% over the​ year?

You are considering the purchase of a new stock. The stock is expected to grow at 2.52% for the foreseeable future and just paid a $2.88 dividend (D0). The required return is 8.2%. Based on this, what is the value of the stock? Round calculations to the nearest cent.

You have $19,878 to invest in a stock portfolio. Your choices are Stock "X" with an expected return of 12.5% and Stock Y with an expected return of 8.24%. If your goal is to create a portfolio with an expected return of 11.92%, how much money will you invest in Stock X?      State of Economy Probability of  State of Economy Return Stock A Return Stock B Return Stock C Boom 0.20 19.41% 20.65% 29.51% Good 0.35 8.08%  10.59% 13.88% Poor 0.40 5.53% 3.23% 5.04% Bust 0.05 1.77% 1.47% 1.16% Your portfolio is invested 23% each in stock A and C and the remaining in stock B. What is the expected return of the portfolio? NOTE: Enter the PERCENTAGE number rounding to two decimals. If your decimal answer is 0.034576, your answer must be 3.46. DO NOT USE the % sign     A Stock has a beta of 1, the expected return on the market is 17.72%, and the risk-free rate is 4.85%. What must the expected return on this stock be? NOTE: Enter the PERCENTAGE number rounding to two…

A stock is selling today for $50 per share. At the end of the year, it pays a dividend of $3 per share and sells for $59.   Required: a. What is the total rate of return on the stock? b. What are the dividend yield and percentage capital gain? c. Now suppose the year-end stock price after the dividend is paid is $44. What are the dividend yield and percentage capital gain in this case?

A share of stock with a beta of 0.8 currently sells for $50. Investors expect the stock to pay a year-end dividend of $5. The T-bill rate is 1%, and the market risk premium is 6%. If the stock is perceived to be fairly priced today, what much be investors' expectation of the price of the stock at the end of the year? $_ Hint: [CAPM] Expected Return (R) = Rf + Beta *Market Risk Premium; Expected Return (R) = Dividend Yield + Capital Gains Yield, where dividend yield=D1/PO and capital gains yield = (P1-Po)/PO

Stan is expanding his business and will sell common stock for the needed funds. If the current risk-free rate is 2.9% and the expected market return is 12.5%, what is the cost of equity for Stan if the beta of the stock is a.0.72, b.0.86,

You are considering an investment in Justus Corporation's stock, which is expected to pay a dividend of $1.75 a share at the end of the year (D1 = $1.75) and has a beta of 0.9. The risk-free rate is 4.6%, and the market risk premium is 5.5%. Justus currently sells for $31.00 a share, and its dividend is expected to grow at some constant rate, g. The data has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the question below.     Open spreadsheet   Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 3 years? (That is, what is ?) Round your answer to two decimal places. Do not round your intermediate calculations. $  fill in the blank 2