INVESTMENTS-CONNECT PLUS ACCESS
11th Edition
ISBN: 2810022611546
Author: Bodie
Publisher: MCG
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Chapter 8, Problem 16PS
Summary Introduction
To select: Choice between stock A and stock B in the passive index portfolio.
Introduction : The value of alpha is measured as a vigorous
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Based on current dividend yields and expected growth rates, the expected rates of return on stocks A and B are 11% and 14%, respectively. The beta of stock A is .8, while that of stock Bis 1.5. The T-bill rate is currently 6%, while the expected rate of return on the S&P 500 index is 12%. The standard deviation of stock A is 10% annually, while that of stock B is 11%. If you currently hold a passive index portfolio, would you choose to add either of these stocks to your holdings?
A stock is expected to pay a dividend of $1.65 at the end of the year. The required rate of return is rs = 9.32%, and the expected constant growth rate is g = 7.2%. What is the stock's current price?
A stock is expected to pay a dividend of $1.26 at the end of the year. The required rate of return is rs = 10.82%, and the expected constant growth rate is g = 1.3%. What is the stock's current price?Round your answer to two decimal places. For example, if your answer is $345.6671 round as 345.67 and if your answer is .05718 or 5.7182% round as 5.72.
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