You want to purchase some shares of Auto Board stock but need a 15% rate of return to compensate for the perceived risk of such ownership. What is the maximum you are willing to spend per share to buy this stock if the company pays a constant R4,90 annual dividend per share? 1. R25,40 2. R32,67 3. R59,33 4. R70,87

D Question 20 1 pts You own $75,000 worth of stock, and you are worried the price may fall by year-end in 6 months. You are considering using either puts or calls to hedge this position. Given this, which of the following statements is (are) correct. L One way to hedge your position would be to buy puts. IL. One way to hedge your position would be to write calls. I.I f major stock price declines are likely, hedging with puts is probably better than hedging with short calls. lonly O l only O , I, and II O land III only

Problem 12-16 CAPM and Expected Return (LO2) A share of stock with a beta of 0.82 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? Complete this question by entering your answers in the tabs below. Required A Required B 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? Note: Do not round intermediate calculations. Round your opportunity cost of capital calculation as a percentage rounded to 2 Opportunity cost of capital The stock is a buy and the investors Show more

i 29 You are bearish on Telecom and decide to sell short 170 shares at the current market price of $70 per share. a. How much in cash or securities must you put into your brokerage account if the broker's initial margin requirement is 50% of the value of the short position? (Round your answer to the nearest whole dollar.) Cash or securities to be put into brokerage account Seved b. How high can the price of the stock go before you get a margin call if the maintenance margin is 30% of the value of the short position? (Round your answer to 2 decimal places.) Margin call will be made at price 4 or higher Help Save

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Question 16 A stock expects to pay a dividend of $3.97 per share one year from today. After paying the dividend, the stock can be sold for $82.85 per share. If the appropriate discount rate for the stock is 16.81 percent, how much is one share of the stock worth today? a $74.33 $492.86 $70.93 None of these options are correct $23.62

10 11 12 13 14 15 16 17 2) Potential stock purchase Wally is thinking about using cash on hand to make some investments. One of these investments is into Talcville Farms (TF). TF's stock is trading at $45. Wally wants you to determine if that is a fair price for the stock. Wally notes that TF just paid a dividend of $3.20 on its stock. The growth rate in dividends is expected to be a constant 5 percent per year indefinitely. Wailly indicates that the company - like most all TF Investors - would require a 15 percent return on the stock for the first three years, a 13 percent return for the next three years, and an 11 percent return thereafter. (a) What is the current share price implied by the information above? (b) Should Wally buy the stock given its current trading price of $45? (c) If the required rate of return were ½ the rates outlined above - and assuming no other changes to the situation outlined above - should Wally still purchase the stock| (d) If the growth rate in dividends…