Imagine that you are an investor who is contemplating whether to purchase a stock which is valued at $100 per share to today that pays a 3.5% annual dividend. The stock has a beta compared with the market of 0.3, which indicates that it is riskier than a market portfolio. Keep in mind also that the risk free rate is 5% and that you would expected the market to rise in value by 9% per year. What is the expected return of the stock using the CAPM formula
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Imagine that you are an investor who is contemplating whether to purchase a stock which is valued at $100 per share to today that pays a 3.5% annual dividend. The stock has a beta compared with the market of 0.3, which indicates that it is riskier than a market portfolio. Keep in mind also that the risk free rate is 5% and that you would expected the market to rise in value by 9% per year.
What is the expected return of the stock using the
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- ← You are thinking of buying a stock priced at $109.31 per share. Assume that the risk-free rate is about 4.03% and the market risk premium is 6.48%. If you think the stock will rise to $118.76 per share by the end of the year, at which time it will pay a $3.48 dividend, what beta would it need to have for this expectation to be consistent with the CAPM? The beta is (Round to two decimal places.) ...You are thinking of buying a stock priced at $106 per share. Assume that the risk-free rate is about 5.1% and the market risk premium is 6.4%. If you think the stock will rise to $115 per share by the end of the year, at which time it will pay a $2.59 dividend, what beta would it need to have for this expectation to be consistent with the CAPM?An investor is considering a stock worth Rs.555 per share today that pays a 9% annual dividend .The stock has a beta compared to the market of 1.5, which means it is riskier than a market portfolio. Also, assume that the risk-free rate is 2% and this investor expects the market to rise in value by 8% per year. Calculate the expected return for the stock or how much the expected earnings of investor by investing in this stock?
- A stock has not been fluctuating much in price. Its average price is $20/share. You expect that the stock price behaves the same way in the next year. A one-year put option is selling for $5, which has an exercise price of $20. Suppose the risk-free rate is 0.05. To make use of your expectation in the future price movement, you establish a straddle strategy to maximize your profits. If the stock price actually ends up at $20 in a year, your profit is $ . Give your answer to 2 decimal places.You have bought a stock for a $100. You are expecting to get a return of 10% while thevolatility of your stock is 20%. if you intend to sell the stock after one year.a- What is the stock price range (upper and lower bound) assuming that the stock returnsare normally distributed, and a two-tailed confidence interval of 90% ? explain youranswer.b- What is the Value at Risk of this investment at a confidence interval of 90% and 95%?explain your answer.c- What are the similarities and differences in calculating the above questions (a and b)?Please support your answer by drawing the needed figures showing each case.You are analyzing a stock that has a beta of 1.19. The risk-free rate is 4.4% and you estimate the market risk premium to be 6.6%. If you expect the stock to have a return of 9.8% over the next year, should you buy it? Why or why not? The expected return according to the CAPM is%. (Round to two decimal places.) Should you buy the stock? (Select the best choice below.) O A. Yes, because the expected return based on the beta is equal to or less than the return on the stock. O B. No, because the expected return based on the beta is greater than the return on the stock.
- A firm's common stock has just paid a $3.00 dividend (Do), which is expected to grow at a constant rate of 6.0 percent each year. The beta of this stock is 1.30, the risk-free rate is 4.0 percent, and the expected return on the market is 10.0 percent. Determine how much you should be willing to pay (the intrinsic value) for this stock today. Assume that CAPM is the correct model for required returns. 536.55 $54.83 $63.97 $73:10 545.69You are considering buying some share in The Wayne Coporation as part of your retirement account. First, you want to calculate the expected return for Wayne Corp's stock to see if it meets your very high standards. You have estimateed the 3 for Wayne Corp to be 2.38, the risk free rate in the market to be 2%, and the expected return on the market to be 20. What is the expected return for Wayne Corp? (Answer in Percentage terms and Round to 2 decimals)You are considering an investment in General Electric’s common stock. The stock is expected to pay a dividend of $5 a share at the end of this year; its beta is 0.9; the risk-free rate is 5.6%; and the market risk premium is 6%. The dividend is expected to grow at some constant rate g, and the stock currently sells for $25 a share. Assuming the market is in equilibrium, what the market believes will be the stock’s price at the end of 3 years &5 Years?
- You are considering an investment in the common stock of Remi's Sporting Goods. The stock is expected to pay a dividend of $1.80 a share at the end of the year (D1=1.80). The stock has a beta of 0.8. The risk-free rate is 4.5%, and the market expected return is 8.0%. The stock's dividend is expected to grow at some constant rate g. The stock currently sells for $24 a share. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 4 years?You are considering an investment in the common stock of Crisp's Cookware. The stock is expected to pay a dividend of $1.80 a share at the end of the year (D1=1.80). The stock has a beta of 0.9. The risk-free rate is 5.0%, and the market expected return is 9.5%. The stock's dividend is expected to grow at some constant rate g. The stock currently sells for $30 a share. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 4 years?Assume that you are using the Capital Asset Pricing Model (CAPM) to find the expected return for a share of common stock. Your research shows the following: Beta = βi = 1.54 Risk free rate = Rf = 2.5% per year Market return = E(RM) = 6.5% per year Based on this information, answer the following: A. Based on the beta, how does the stock's risk compare to the market overall? On what do you base your answer? B. Based on the beta, how would you expect the stock's returns to react to a decrease in returns in the market overall? Why? C. According to the CAPM and the information given above, what is the expected return E(Ri) for this stock? D. If the required rate of return on this stock were 7% per year, would you invest? Why or why not?