1A share of stock with a beta of 0.85 now sells for $60. Investors expect the stock to pay a year-end dividend of $2. The T-bill rateIs 4%, and the market risk premium is 7%. If the stock is perceived to be fairly priced today, what must be investors' expectationof the price of the stock at the end of the year? (Do not round Intermediate calculations. Round your answer to 2 decimalplaces.)Stock pricesis.docxWalmartAnalysis.pdf< Prev12 of 17Next >Show Allx

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Answered: A share of stock with a beta of 0.85…

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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A stock's dividend in 1 year is expected to be $2.7. The dividend is expected to remain the same indefinitely. The stock's required return is 9%. The estimated value of the stock today is $________. Do not round any intermediate work, but round your final answer to 2 decimal places (ex: $12.34567 should be entered as 12.35).
A stock is expected to pay a dividend of $1.00 at the end of the year (i.e., D1 = $1.00), and it should continue to grow at a constant rate of 5% a year. If its required return is 12%, what is the stock's expected price 4 years from today? Do not round intermediate calculations. Round your answer to the nearest cent. $
ABC Stock is currently priced at $75. The stock is expected to be worth $85 in one year and you expect to receive a dividend of $2.00 a share. The beta of ABC is 0.90. The risk free rate is 3% and the expected return of the stock market is 10%. Should you invest in ABC stock? What is the fair value estimate for ABC stock today?
A stock will pay its next dividend of $7.81 exactly 1 year from now. After this first dividend, future dividends will grow at -4% for 2 years and then 3% per year every year thereafter. If the stock market is efficient and the appropriate discount rate of 12.9%, what is the best guess of the company's stock price today? Round your answer to the nearest penny.
A stock is expected to pay a dividend of $0.50 at the end of the year, and it should continute to grow at a constant rate of 6% a year. If its required return is 15%, what is the stock's expected price 2 years from today? Do not round intermediate calculations. Round your answer to the nearest cent.
You purchase 115 shares of stock for $53 a share. The stock pays a $7 per share dividend at year- end. What is the rate of return on your investment for these end-of-year stock prices? What is your real (inflation-adjusted) rate of return? Assume an inflation rate of 5%. (Round your answers to 2 decimal places. Use the minus sign for negative numbers If it is necessary.) a. End-of-year stock price = $48 Rate of return Real rate b. End-of-year stock price = $53 Rate of return Real rate c. End-of-year stock price = $60 Rate of return Real rate
ABC Inc. is expected to pay a dividend of $1.01 at the end of the year (year 1). The stock has a beta of 1.64. The risk-free rate is 2.9%. The expected return on the market is 7.2%. The stock's dividends are expected to grow at a constant rate. The stock price today is $30.66. If the market is in equilibrium what does the market believe the stock price will be in 3 years? ABC Inc has an outstanding preferred share. The preferred share just paid a dividend of $0.99. Dividends are paid quarterly. The price of stock today is $52.18. What is the effective annual rate of return?
A stock is expected to pay a dividend next year of $2.3. The dividend amount is expected to grow at an annual rate of 5.1% indefinitely. Assuming a required return on the stock of 11.2% in the future, the dividend yield on the stock is ______%. Do not round any intermediate work, but round your final answer to 2 decimal places (ex: 12.34567% should be entered as 12.35).
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
Required: Investors expect the market rate of return this year to be 19.00%. The expected rate of return on a stock with a beta of 1.2 is currently 22.80%. If the market return this year turns out to be 17.60%, how would you revise your expectation of the rate of return on the stock? (Do not round intermediate calculations. Round your answer to 1 decimal place.) Revised rate of return %
am. 118.
The stock price of XYZ Co. is $24.82. Investors require an 8.46 percent rate of return on similar stocks. If the company plans to pay a dividend of $2.52 next year, what constant growth rate (in percent) is expected for the company's stock price? Answer to two decimals.

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