Your turn-Problem #4 Yasmine's Diamonds has a beta coefficient of 1. Currently the risk-free rate is 2 percent and the anticipated return on the market is 6 percent. JJM pays a $4.20 dividend that is growing at 1 percent annually. Do not round intermediate calculations. a. What is the required return? Round your answer to two decimal places. b. Given the required return, what is the value of the stock? Round your answer to the nearest cent. c. If the stock is selling for $108, what should you do? d. If the beta coefficient declines to 0.8, what is the new value of the stock? Round your answer to the nearest cent.
Your turn-Problem #4 Yasmine's Diamonds has a beta coefficient of 1. Currently the risk-free rate is 2 percent and the anticipated return on the market is 6 percent. JJM pays a $4.20 dividend that is growing at 1 percent annually. Do not round intermediate calculations. a. What is the required return? Round your answer to two decimal places. b. Given the required return, what is the value of the stock? Round your answer to the nearest cent. c. If the stock is selling for $108, what should you do? d. If the beta coefficient declines to 0.8, what is the new value of the stock? Round your answer to the nearest cent.
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
Related questions
Question
None
Transcribed Image Text:Your turn-Problem #4
Yasmine's Diamonds has a beta coefficient of 1. Currently the risk-free rate is 2 percent and the
anticipated return on the market is 6 percent. JJM pays a $4.20 dividend that is growing at 1 percent
annually. Do not round intermediate calculations.
a. What is the required return? Round your answer to two decimal places.
b. Given the required return, what is the value of the stock? Round your answer to the nearest
cent.
c. If the stock is selling for $108, what should you do?
d. If the beta coefficient declines to 0.8, what is the new value of the stock? Round your answer to
the nearest cent.
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps
Recommended textbooks for you
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
Essentials Of Investments
Finance
ISBN:
9781260013924
Author:
Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:
Mcgraw-hill Education,
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