Compute the required return for an investment

Assignment Help Finance Basics
Reference no: EM133003215

Target stock is currently selling for $175.40 a share. It is expected to reach a price of $188.20 a year from now. You expect the company to pay a dividend of $2.72 in the next year and the stock's beta is 0.98. The risk-free rate of return is 4.5% and the market rate of return is 11.5%. CAPM states that: RR = RF + β(RM - RF).

b. Compute the required return for an investment in Target stock. [Show answer to 2-decimal places] [Hint: returns are in percentages]

Reference no: EM133003215

Questions Cloud

Define semi-strong-form market efficiency : (a) Define semi-strong-form market efficiency.
Determine the supply and demand for currency : Like most of the exchange rates, $/£ exchange rate is a floating rate, explain three factors that determine the supply and demand for each currency and explain
What is the amount of the dividend per share : What is the amount of the dividend per share paid today if the market rate of return on this stock is 18.64 percent?
Question on options trade : Consider a European put option on a non-dividend-paying stock where the stock price is ££50, the strike price is 50, the risk-free rate is 3.5% per annum, the v
Compute the required return for an investment : b. Compute the required return for an investment in Target stock. [Show answer to 2-decimal places] [Hint: returns are in percentages]
Nominal interest rate and real interest rate : If you invest in a bond with maturity of 3 years and this bond pay you JD 1500 on the last day of every month (m=12) knowing that the annual interest rate on yo
Indicate the steps that the bank would take in an attempt : Clearly indicate the steps that the bank would take in an attempt to earn a speculative gain in the interbank market.
What is the hedged value using forward contracts : An exporter in the US has sold 20 million (in Pounds) in goods to one company in UK. Payment is due in 180 days.
Assumption of a fixed rate of return : GILTI is calculated based on the assumption of a fixed rate of return on a corporation's assets. Any remaining income is deemed to be generated by assets.

Reviews

Write a Review

Finance Basics Questions & Answers

  Study of bottled water companies conducted by health council

A four year study of bottled water companies conducted by a health council found that 25% of bottled water is just tap water packaged in a nice bottle.

  What must the expected return on this stock be

A stock has a beta of 1.32, the expected return on the market is 10 percent, and the risk-free rate is 3.5 percent. What must the expected return on this stock be?

  Putting a dollar value on financial goals

When to use future value and present value in putting a dollar value on financial goals

  What happens to the size of bank of dreams

If asset conversion is used and securities are sold to provide money for the loans, what happens to the size of Bank of Your Dreams?

  What is the expected return on the portfolio

You own a portfolio that has $3,200 invested in Stock A and $4,200 invested in Stock B. If the expected returns on these stocks are 12 percent and 15 percent, respectively, what is the expected return on the portfolio?

  Efficient market hypothesis

What form, if any, of the Efficient Market Hypothesis do you think exists? Explain why you believe what you believe. Then explain how you would "invest" going f

  Prepare a report analyzingone stock

Prepare a report analyzingone stock

  Analysis of the model-investment committee

After years of complaints from motorists living in Manly and on Sydney's Northern Beaches, the NSW Government has finally decided to improve traffic on one of Sydney's most congested roads.

  What is the company''s inventory turnover ratio

Jason Traders has sales of $833,587, a gross profit margin of 32.4 percent, and inventory of $178,435. What is the company's inventory turnover ratio? Please show work!

  A mysterious black stallion with great form

Hippique s.a., which owns a stable of racehorses, has just invested in a mysterious black stallion with great form but disputed bloodlines. Some experts in horseflesh predict the horse will win the coveted Prix de Bidet;

  Responsibilities surrounding the sales of alcohol

What are the ways that IT can help comply with legal requirements and social responsibilities surrounding the sales of alcohol?

  Conduct the cost-benefit analysis

The cost-benefit analysis should include one of the following course-related topics: quality, patient safety, risk management, regulatory standards, compliance.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd