CORPORATE FINANCE - CONNECT ACCESS
CORPORATE FINANCE - CONNECT ACCESS
12th Edition
ISBN: 9781264054893
Author: Ross
Publisher: MCG
Question
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Chapter 11, Problem 28QAP

a

Summary Introduction

Adequate information:

Expected return for Stock A ERA = 0.11

Expected return for Stock B ERB = 0.13

Standard deviation of Stock A σA = 0.47

Standard deviation of Stock B σB = 0.81

Weight of Stock A WA = 0.40

Weight of Stock B WB = 0.60

Correlation between Stock A and B ρA,B = 0.5

To compute: Expected return on the portfolio.

Introduction: Expected return on the portfolio refers to the return expected on the investment portfolio.

b

Summary Introduction

Adequate information:

Correlation between Stock A and B ρA,B = -0.5

To compute: Standard deviation of the portfolio.

Introduction: Standard deviation of the portfolio refers to the deviation of the actual returns from the expected returns.

c

Summary Introduction

To compute: Effect of correlation between Stock A and B on the standard deviation of the portfolio.

Introduction: Correlation refers to the degree of fluctuation of two variables in relation to one another.

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You've collected the following information from your favorite financial website. 52-Week Price Dividend Hi 77.40 Lo Stock (Dividend) Yield % PE Ratio Close Price Net Change 10.43 Acevedo .36 2.6 6 13.90 -.24 55.81 33.42 Georgette, Incorporated 1.54 3.8 10 40.43 -.01 131.04 70.05 YBM 2.55 2.9 10 89.08 3.07 50.24 35.00 13.95 Manta Energy .80 5.2 6 20.74 Winter Sports .32 1.5 28 15.43 ?? -.26 .18 According to analysts, the growth rate in dividends for YBM for the next five years is expected to be 21 percent. Suppose YBM meets this growth rate in dividends for the next five years and then the dividend growth rate falls to 5.75 percent, indefinitely. Assume investors require a return of 14 percent on YBM stock. According to the dividend growth model, what should the stock price be today? Note: Do not round intermediate calculations and round your answer to 2 decimal places, e.g., 32.16.)

Chapter 11 Solutions

CORPORATE FINANCE - CONNECT ACCESS

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