Calculate the price of a stock that has a one-period horizon

Assignment Help Business Management

Reference no: EM13711646

1.Calculate the price of a stock that has a one-period horizon, is expected to pay a dividend of $.20 per share for the period, with the following prices and associated probabilities forecast at the end of the period

Probability 0.3

Price

$40

0.1

$45

0.2

$55

0.3

$62

0.1

$70

The return on comparable stocks is 8%.

2. JetBlue Airways Corporation (JBLU) reports the following in its latest quarterly

report

Authorized shares

Shares issued

Shares outstanding

500,000,000

317,391,718

290,305,387

a. How many shares are in the treasury stock?

b.If the float is 280,700,408 shares, find the number of restricted shares.

c. Recently, JBLU closed at $5.51 per share. Based on this price, find the market capitalization of the company.

To answer questions 3 and 4, refer to the articles by Malkiel and Shleifer available on the

course web site, in addition to what we covered in class.

3. a.Why do Malkiel, and those who think like him, believe in efficient market theory?

b.What are three attacks on EMH that Malkiel attributes to the behavioralists?

c.What does Malkiel believe about the market patterns the behavioralists claim to have discovered?

4. How does Shleifer define arbitrage? How does he use the concept to argue against market efficiency?

b. Why would the market value of Royal Dutch equal 1.5 times the market value of Shell if efficient market theory is correct?

c. Why is the Royal Dutch/Shell case something of an embarrassment for EMH?

d. How does the fact that arbitrage is risky argue against EMH?

5.What is the beta of a stock with an expected return E(ri) = 18%, when the risk-free

rate rF = 6%, and the expected market return E(rM) = 14%? Show your work.

6.True or false? Explain: Stocks with a beta of zero offer an expected rate of return of zero.

7. Suppose the rate of return on short-term government securities (perceived to be riskfree) is 5%. Suppose also that the expected rate of return required by the market for a

portfolio with a beta of 1 is 12%. According to the CAPM

a. What is the expected rate of return on the market portfolio?

b.What would be the expected rate of return on a stock with = 0?

8. Describe the two kinds of contracts that an underwriter can negotiate with a firm

wishing to do an IPO. Discuss which is more costly to the issuing firm, and why.

Reference no: EM13711646

Questions Cloud

Personal and professional credibility may be at stake : Compose a persuasive letter to your manager at corporate headquarters, proposing that you test your approach for the first year after the self-checkout machines are installed in your store. Keep in mind that if the plan succeeds, your boss may ..

Describe what will and will not work at pegasus : 1.Identify and describe 3 process skills that are necessary for the consultant to have to facilitate change. 2.Describe what will and will not work at Pegasus.

Discuss the appropriateness of using the same leadership : Discuss the appropriateness of using the same leadership style of all EU countries. Include in your discussion the research results from both views given in your textbook. The text book is International Management.

Investment plan for the year : 1. It is January 2nd and senior management of Chester meets to determine their investment plan for the year. They decide to fully fund a plant and equipment purchase by issuing $10,000,000 in bonds. Assume the bonds are issued at face value a..

Calculate the price of a stock that has a one-period horizon : 1.Calculate the price of a stock that has a one-period horizon, is expected to pay a dividend of $.20 per share for the period, with the following prices and associated probabilities forecast at the end of the period

Important way to penetrate to the untapped market : Cable companies nowadays could analyze their customers' information and estimate their rough income. So they could advertise Aldi's information more precisely to customers who meet our standards - Important way to penetrate to the untapped market a..

Natural frequencies of vibration of a uniform beam : Natural frequencies of vibration of a uniform beam clamped at one end and free at the other are solutions of the equation - output explain how you know your program has actually found the correct "physically meaningful" roots within the expected err..

Paper on the effects of divorce : Paper on the effects of divorce - How has the divorce affected the child''s adult life and relationships.

Write a direct and concise thesis statement : Write a direct and concise thesis statement - Identify how this selection relates to your academic and professional pursuits.

User Account

All Pages