Reference no: EM133069539

- Betsy Co is working on maintaining a steady dividend payout ratio over the years. Each year, for the last several years, Betsy Co has paid out 30% of its net income as dividends. The remaining funds were retained by Betsy Co and allocated to different projects, with an average return on equity of 14.5%. Let's say they are able to keep this dividend payout ratio and return on equity going forward. Their stock is currently selling for 100 dollars per share and just paid its annual dividend of 2.50 per share. Use their retention ratio and return on equity to estimate the dividend growth rate. In addition, use the constant growth model to estimate the firm's cost of equity.

- George has 2000 dollars invested into a combination of the risk-free asset and a risky portfolio that consists of two stocks: Doge and Shiba. The whole portfolio is such that 500 dollars are lent at the risk-free rate while the rest goes towards the risky portfolio. Doge is way less volatile than Shiba's. Their stnd. deviation of returns is 20% for Doge and 40% for Shiba, in the meantime, the correlation between these two is of 10%. The risky portfolio weights that maximize the Sharpe ratio are 0.7 for Doge and 0.3 for Shiba, now, calculate the standard deviation of the complete portfolio.