Calculate the expected rate of return of stock

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Reference no: EM132547007 , Length: 2 pages

Question 1 Explain the difference between the firm-specific (non-systematic) risk and the market (systematic) risk. Outline the implication of each type of risk for assessing the riskiness of an individual financial asset that is trading in a given market.

Question 2 Explain the difference between the traditional correlation approach and the Capital Asset Pricing Model (CAPM) approach to evaluating the risk of an individual financial asset.

Question 3 Explain what steps would you take to compare the worthiness of two different financial investments? How would you choose which investment is a more attractive choice?

Question 4 Explain whether there are typically differences between the past performance and the future performance of a financial investment? If not. why not?

Question 5 What is the difference between the daily market valuation of a tradeable security and its valuation based on the application of the discounted cash flow approach?

Question 6 Explain what Is the criterion used by a rational Investor for choosing a financial investment in terms of its risksetum combination.

Question 7 Calculate the current price of stock Ain 3 years from today, given that the stock lust paid a dividend of 2.2 USD per share. which Is expected to grow steadily by 004 percent for ever, while the market requires a return of 0.1 percent for the stock. Give your answer In 0.000.

Question 8 Stock A experiences nonoonstant growth for the first 3 years and subsequently it experiences constant growth. The issuer of stock &lust paid a dividend of USD 3.1 per share. The growth rate of dividend during the first 3 years of supernormal growth Is expected to he 0.09. From the beginning of year 4, the growth rate or dividend is expected to stabilize at 0.09 for ever. The market requires a return of 0.14 for stock A. Calculate the price of stock A today.

Question 9 Suppose the historical returns ft, of a financial investment for each of the past 7 years are r1 = -4.3, r2 = 3.5. r3 = -9.8, r4 = -5.2 r5 =-4.7, r6 = -7.9. respectively. Calculate the average investment eturn, RoR during the 7.year period. The formula is RoR = ΣRi/n. Give you answer In 0.000,

Question 10 Stock A has beta coefficient = 0.72, Calculate the expected rate of return of stock A over that the risk-free rate is 0.32 and the annual madost rate of return is GM Give your answer in 0.000.

Question 11 You are Offered a 3.year investment opportunity thm requires investing USD 1.712 today. The investment will pay you an income of USD MY year 1. 1/50 61 In year 2 and USD 72 in year 3. At the end of year 3, t will also pay a total turn Of USD 2041. The current interest rate is CLOG percent is the investment wonh undertaking? Give your answer In0.000.

Question 12

Stock A experiences non-constant growth for the first 3 years and subsequently It experiences constant growth. The issuer of stock Ajust pak a dividend of uSD 3.4 per share. The growth rate of dividend during the first 3 years of supernormal growth Is expected to be GOO. From the beginning of year 4- the growth rate of dividend is expected to stabilize at 0.08 for ever. The market requires a return of 0.13 for Moth. Calculate the price of stock A today. Give an answer of 0000.

Reference no: EM132547007

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