Discuss the constant growth model of stock valuation

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1. Suppose you are interested in forecasting expected return next year for a share of stock you have owned for the last three years. Describe in words the steps you would undertake to come up with your forecast.

 

2. What aspects of the CAPM model do you think would be quite useful in the real-life investment and what aspects do you think might not be realistic in the real-life investment?

3. Discuss the Constant Growth Model of stock valuation. Include in your discussion the advantages, disadvantages and assumptionsof the model.

4. Discuss the following questions regarding the valuation equations for bonds and for common stocks, which are listed below:

(1) What are in common in the valuation equations for bonds and for common stocks?

(2) What are the differences between the valuation equation for bonds and that for common stocks?

(3) Why can't we use the valuation equation for bonds to valuate the common stocks?

Reference no: EM132444773

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