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Calculate expected return of this share

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Reference no: EM132801781

Question - David is a professional investor who actively trade on ASX. He has a risk balanced investment portfolio that include of Growing Share and Stable Bond. His portfolio has been established for five years.

Required -

a) Assume that Expected return of Growing Share in David's portfolio is 12%, the risk premium on the stocks of the same industry is 5.6%, the beta of this share is 1.2 and the inflation rate was 1.2 %. Calculate risk free rate which is used to calculate expected return of this share, using Capital Asset Pricing Model (CAPM)?

b) If David's portfolio has provided her with returns of 12.5%, -5.5%, 11.6%, 15.7% and 16.8% over the past five years, respectively. Calculate the geometric average return of the portfolio for this period?

c) Assume that David bought 500 Golden Share in his portfolio for total investment of $3500, now the market price of the stock is $12, the dividend paid for this stock is $3 per year. How much is the dividend yield of this share?

Reference no: EM132801781

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