Answered: calculate the stocks expected rate of…

calculate the stocks expected rate of return b) determine the stocks actual rate of return c) should you purchase a stock explain

Intermediate Financial Management (MindTap Course List)

13th Edition

ISBN:9781337395083

Author:Eugene F. Brigham, Phillip R. Daves

Publisher:Eugene F. Brigham, Phillip R. Daves

Chapter8: Basic Stock Valuation

Section: Chapter Questions

Problem 3P

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Question

David Jones which has a beta of 1.65 is currently selling at $45 per share on the basis of company’s strong growth you expect the stock price to be $52 per share at the end of one year the current risk free rate is 6.5%

a) calculate the stocks expected rate of return
b) determine the stocks actual rate of return
c) should you purchase a stock explain

Definition Definition Percentage gain or loss from a specific investment over time. The rate of return is the difference between the closing and initial values of an investment divided by the initial value of the investment. The closing value includes any intermediate cash flows such as dividends or interest amounts.

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