Reference no: EM131204481
Problem 1:
You invest in a portfolio of 5 stocks with an equal investment in each one. The betas of the 5 stocks are as follows: .75, -1.2, .90, 1.3, 1.5. The risk free return is 4% and the market return is 9%.??A. Compute the beta of the portfolio ?B. Compute the required return of the portfolio
Problem 2:
You are given the following probability distribution for a stock:??Pr. Outcome.5 ?.4 10%?.1 -6%?.5 12%
A. Compute the expected return of this stock ?B. Compute the standard deviation
Problem 3:
You are given the following probability distribution for a stock:??Pr. Outcome.6 ?.4 -4%?.6 12%
A. Compute the expected return ?B. Compute the standard deviation ?C. Presuming the stock returns are normally distributed, what do these results indicate?
Problem 4:
A stock has a beta of 0.8. The market return is 14% and the risk free return is 3%. Compute the required return for this stock.
Problem 5:
A stock paid a dividend of $1.50 yesterday. The stock is expected to grow at a rate of 4% per year indefinitely. Investors require a return of 13% to invest in this stock. Compute its fair market value.
Problem 6:
A stock's next 3 dividends are as follows: $0.50, 0, $1.00. After that, the stock is expected to grow at a rate of 2% indefinitely. The required return on this stock is 12%. Compute its intrinsic value.
Problem 7:
A stocks next 2 dividends are as follows: $0.25 and $1.00. After that, the stock is expected to grow at a rate of 4% indefinitely. The required return on this stock is 16%. Compute its fair market value.
Problem 8:
A stock's next expected dividend is $0.50. Dividends are expected to grow at a rate of 3% indefinitely. The required return is 10%. Compute its intrinsic value.
Problem 9:
A stock's next 2 dividends are expected to be $0.50 and $0.75, respectively. Afterwards, dividends are expected to grow at a constant rate of 4% per year indefinitely. The required return on this stock is 12% during the non-constant period and 10% afterwards. Compute its fair market value.
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