Compute the price of a share of stock that pays a 1-

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1. Compute the price of a share of stock that pays a $1- per-year dividend and that you expect to be able to sell in one year for $20, assuming you require a 15% return.

2. After careful analysis, you have determined that a firm s dividends should grow at 7% on average in the foreseeable future. Its last dividend was $3. Compute the current price of this stock, assuming the required return is 18%.

3. If the public expects a corporation to lose $5 a share this quarter and it actually loses $4, which is still the largest loss in the history of the company, what does the efficient market hypothesis say will happen to the price of the stock when the $4 loss is announced?

4. An index has an average (geometric) mean return over 20 years of 3.8861%. If the beginning index value was 100, what was the final index after 20 years?

Reference no: EM13573063

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