Top hedge fund manager Diana Sauros believes that a stock with the same market risk as the S&P 500 will sell at year-end at a price of $56. The stock will pay a dividend at year-end of $4.00. Assume that risk-free Treasury securities currently offer an interest rate of 1.9%. Average rates of return on Treasury bills, government bonds, and common stocks, 1900-2013 (figures in percent per year) are as follows. Portfolio Avg Annual Rate Average Premium (extra return of Return versus treasury bills) Treasury bills 3.9 Treasury 5.2 Bonds Common Stocks 11.5 1.3 7.6 What is the discount rate if the interest rate is 4.0% ? (Enter your answer as a percent rounded to 2 decimal places.) Discount rate 6=? What price should she be willing to pay for the stock today? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Stock price $ =?

Top hedge fund manager Diana Sauros believes that a stock with the same market risk as the S&P 500 will sell at year-end at a price of $56. The stock will pay a dividend at year-end of $4.00. Assume that risk-free Treasury securities currently offer an interest rate of 1.9%. Average rates of return on Treasury bills, government bonds, and common stocks, 1900-2013 (figures in percent per year) are as follows. Portfolio Avg Annual Rate Average Premium (extra return of Return versus treasury bills) Treasury bills 3.9 Treasury 5.2 Bonds Common Stocks 11.5 1.3 7.6 What is the discount rate if the interest rate is 4.0% ? (Enter your answer as a percent rounded to 2 decimal places.) Discount rate 6=? What price should she be willing to pay for the stock today? (Do not round intermediate calculations. Round your answer to 2 decimal places.) Stock price $ =?

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

See similar textbooks

Similar questions

CyberSecure Inc. has annual growth rate of 4.6 percent and is equally as risky as the market. The stock is currently selling for $16 a share. The overall stock market has a 10.9 percent rate of return which includes an estimated risk premium of 7.8 percent. What is the expected rate of return on this stock? (round answer to whole number with one decimal point: i.e., use 1.2 percent instead of 0.0123)
You have funds invested in a mutual fund of S&P 500 stocks. Over the last 5 years, the annual percent returns of the S&P 500 are 19.58%, −6.30%, 28.94%, 16.32%, and 14.55%. What is the average annual percent return on the S&P 500 stocks over the last 5 years? The average annual percent return?? (the answer is not 14.62%)
The average return on the Market is 10% while the nominal risk-free rate is 2.5%. Determine the required rate of return of the portfolio.
You have the following rates of return for a risky portfolio for several recent years. Assume that the stock pays no dividends. Year Beginning of Year Price # of Shares Bought or Sold 2016 $ 50.00 100 bought 2017 $ 55.00 50 bought 2018 $ 51.00 75 sold 2019 $ 54.00 75 sold What is the dollar-weighted return over the entire time period? Multiple Choice 0.74% 2.87% 2.6% 2.21%
The return on treasury notes is expected to be 6.85%. The market risk premium is 9.22%. What is the expected return on a stock with a beta of 1.7?
May I have the step by step calculations for the following: Linke Motors has a beta of 1.30, the T-bill rate is 3.00%, and the T-bond rate is 6.5%. The annual return on the stock market during the past 3 years was 15.00%, but investors expect the annual future stock market return to be 13.00%. Based on the SML, what is the firm's required return?
Top hedge fund manager Sally Buffit believes that a stock with the same market risk as the S&P 500 will sell at year-end at a price of $42. The stock will pay a dividend at year-end of $4.00. Assume that risk-free Treasury securities currently offer an interest rate of 1.7%. Average rates of return on Treasury bills, government bonds, and common stocks, 1900–2017 (figures in percent per year) are as follows. Portfolio Average AnnualRate of Return (%) Average Premium (Extra returnversus Treasury bills) (%) Treasury bills 3.8 Treasury bonds 5.3 1.5 Common stocks 11.5 7.7 a. What is the discount rate on the stock? (Enter your answer as a percent rounded to 2 decimal places.) b. What price should she be willing to pay for the stock today? (Do not round intermediate calculations. Round your answer to 2 decimal places.)
The stock of Verdoni, Inc., has a beta of 1.28. The risk-free rate of return is 2.62 percent, the inflation rate is 2.1 percent, and the expected market rate of return is 9.3 percent. What is the expected return on Verdoni’s stock?
i need the answer quickly
3. Assume that the market is in equilibrium and that stock betas can be estimated with historical data. The returns on the market, the returns on United Fund (UF), the risk-free rate (7.00%), and the required return on the United Fund (15.00%) are shown below. Based on this information, what is the required return on the market, ? Year 2011 2012 2013 2014 2015 Market -9% 11% 15% 5% -1% UF -14% 16% 22% 7% -2%
The average return on the Market is 10% while the nominal risk-free rate is 2.5%. Determine the required rate of return of the portfolio. (In percentage, type the percentage sign on your answer)
Top hedge fund manager Sally Buffit believes that a stock with the same market risk as the S&P 500 will sell at year-end at a price of $50. The stock will pay a dividend at year-end of $2. Assume that risk-free Treasury securities currently offer an interest rate of 2%. Average rates of return on Treasury bills, government bonds, and common stocks, 1900-2017 (figures in percent per year) are as follows. Average Premium (Extra return veraus Treasury bills) () Average Annual Rate of Return Portfolio Treasury billa Treasury bonda Common atocks (%) 3.8 5.3 11.5 1.5 7.7 a. What is the discount rate on the stock? (Enter your answer as a percent rounded to 2 decimal places.) Discount rate % Prev 1 of 5 Next > search

SEE MORE QUESTIONS

Recommended textbooks for you

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

Essentials Of Investments

Finance

ISBN:

9781260013924

Author:

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

Publisher:

Mcgraw-hill Education,

FUNDAMENTALS OF CORPORATE FINANCE

Finance

ISBN:

9781260013962

Author:

BREALEY

Publisher:

RENT MCG

Financial Management: Theory & Practice

Finance

ISBN:

9781337909730

Author:

Brigham

Publisher:

Cengage

Foundations Of Finance

Finance

ISBN:

9780134897264

Author:

KEOWN, Arthur J., Martin, John D., PETTY, J. William

Publisher:

Pearson,

Fundamentals of Financial Management (MindTap Cou…

Finance

ISBN:

9781337395250

Author:

Eugene F. Brigham, Joel F. Houston

Publisher:

Cengage Learning

Corporate Finance (The Mcgraw-hill/Irwin Series i…

Finance

ISBN:

9780077861759

Author:

Stephen A. Ross Franco Modigliani Professor of Financial Economics Professor, Randolph W Westerfield Robert R. Dockson Deans Chair in Bus. Admin., Jeffrey Jaffe, Bradford D Jordan Professor

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS