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Calculate the expected return of stock

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Reference no: EM133111343

a. Given the following data: State of Economy Return on Stock A (%) Return on Stock B (%) Bad 7.3 -4.7 Normal 11.5 5.4 Good 16.6 24.3

1. Calculate the expected return of each stock.

2. Calculate the standard deviation of returns of each stock.

3. Calculate the covariance and correlation between the two stocks.

b. Company N expects to pay a dividend in the following years: Year 1 $1.00 Year 2-5 will grow 10% per year Year 6+ will grow 2% per year Assume, the cost of capital is 8%. What is today's share price?

Reference no: EM133111343

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