Round your answers to the nearest cent. a. What is the value of a stock if: Do = $3.10 k = 12% g = 8% 2$ b. What is the value of this stock if the dividend is increased to $4.30 and the other variables remain constant? c. What is the value of this stock if the required return declines to 9 percent and the other variables remain constant? 2$ d. What is the value of this stock if the growth rate declines to 5 percent and the other variables remain constant? 2$ e. What is the value of this stock if the dividend is increased to $3.70, the growth rate declines to 5 percent, and the required return remains 12 percent? 2$

2. Required Rate of Return Suppose TRF = 4%, FM 9%, and FA = 8%. (a) Calculate Stock A's beta. Round your answer to one decimal place. - (b) If Stock A's beta were 1.3, then what would be A's new required rate of return? Round your answer to one decimal place. % 22222222 122122222322 2014 25226225 250-50 22 352525 2----- 2015

Suppose that the initial dividend on a stock is £1. The interest rate is 3 percent and the growth rate of dividends is constant at 2 percent. What Is the prics of the stock?

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?

Assume the Black-Scholes framework. You are given: i. S(t) is the stock price at time t. ii. The stock's volatility is 25%. iii. The continuously compounded expected rate of return is 8%. iv. The stock pays dividends continuously at a rate of 3% proportional to its price. v. The continuously compounded risk-free interest rate is 4%. vi. The current stock price is S (0) 125. Calculate Pr (S (4) > 150 S (2) - 120). Possible Answers A. 0.30 0.40 C 0.65 D. 0.70 0.85

Am. 132.

An investor buys a stock if price rises 5% from the 250-day low and shorts a stock if price falls 5% from the 250-day high. What is this strategy called? Will it work if the market is efficient? Explain why

Consider the following information: State   Probability   Stock A   Stock B   Stock C  Boom     0.32         0.09        -0.01        0.01  Bust       0.68         -0.05        0.28        0.03 What is the expected return of a portfolio that has invested $9,981 in Stock A, $6,817 in Stock B, and   $2,123 in Stock C? (Hint: calculate weights of each stock first). Enter the answer with 4 decimals (e.g. 0.1234).

You live in a world where assets are priced by the CAPM. The following information is given to you regarding stock X. The expected payoff from the stock X=£105.00 Expected return of stock X = 18% Risk-free rate =5% Market Risk Premium = 9%   Assume there are no other changes, except that the correlation between the returns of Stock X and the market becomes twice what it is currently. How would this change affect the current price of Stock X? Explain why the change of the correlation causes the observed change in the stock price. [hint: Provide a risk-based explanation]

U Assume CAPM holds. We know expected return and beta of two stocks: Stock A: E[ra] = 10% and beta_a = 1.5 Stock B: E[rb] = 5% and beta_b = 0.5 What would be the expected return of a stock that has a beta of 0.9? O 6.5% Ⓒ7% O 7.5% O 6% Question 5 Which of the following statements is false? o The CAPM follows from equilibrium conditions in a frictionless mean-variance economy with rational investors According to CAPM, everyone should hold a mix of the market portfolio and the risk-free asset. According to CAPM, everyone can generate positive return by buying positive alpha stocks and by selling negative alpha stocks. According to CAPM, the expected return on a stock is a linear function of its beta.