Solution-Expected return on the market using the capm model

Expected return on the market using the capm model

Reference no: EM13530630

1. CAPM is one of the more popular models for determining the risk premium on a stock. If the Expected Return on the Stock is 20.38 percent, the Risk-Free Rate is 9.0 percent, and the Beta for Stock i is 1.75. Find the Expected Return on the market using the CAPM model. Show your work.

2. XYZ company paid a dividend of $1.25 during the past 12 months. The expected growth rate is 7 percent, and the required rate of return is 9.5 precent based on the cost of capital. Calculate the current price of the stock. Do not use a financial calculator or an online calculator. You must show your work.

3. Company XYZ is expected to grow at 15% annually forever, and its dividend in the next 12 months is expected to be $1.50, and its required rate of return is 19.5%.
a. What is its intrinsic value?
b. If the current price is equal to its intrinsic value, what is next year's expected price?
c. Assume you buy the stock now and sell it after receiving the $1.50 dividend one year from now. What would be your anticipated capital gain in percentage terms?
What is the dividend yield and the holding period return?

Reference no: EM13530630

Questions Cloud

Find what is the reading on the scale : A person whose mass is m = 59.5 kg steps on a mechanical bathroom scale placed on an inclined plane that makes the angle ? = 25.5° with the horizontal. What is the reading on the scale

Explain how many moles of no2- are in 30 ml : A stock solution is prepared by adding 35 mL of 1.5 M NaNO2 to enough water to make 49 mL. How many moles of NO2- are in 30 mL of the stock solution

The impact of the affordable care act on the health : Write a paper about The Impact of the Affordable Care Act on the Health Care Workforce

Explain what is the br- concentration in the dilute solution : When 7 mL of a solution containing 2.7 M AlBr3 is diluted to 33 mL, a dilute solution is formed. What is the Br- concentration in 15 mL of the dilute solution

Expected return on the market using the capm model : 1. CAPM is one of the more popular models for determining the risk premium on a stock. If the Expected Return on the Stock is 20.38 percent, the Risk-Free Rate is 9.0 percent, and the Beta for Stock i is 1.75. Find the Expected Return on the ..

Define what is the cell voltage : Consider the following reaction 2Fe 2(aq) +Cu 2 ---> 2Fe 3 (aq) Cu, When the reaction comes to equilibrium, what is the cell voltage

Calculate the cost of preferred stock : Calculate the cost of preferred stock

Explain what would be the mass of teh magnesium hydrooxide : What would be the mass of teh magnesium hydrooxide produced per reaction in the above equation if the % yeild was 88.5%

Explain how a gene directs the synthesis of a protein : Explain how a gene directs the synthesis of a protein. Include in your explanation thewords amino acid, anti-codon, codon, cytoplasm, DNA, mRNA, nucleotide, nucleus,ribosome, RNA polymerase, tRNA, transcription, and translation.

User Account

All Pages

Expected return on the market using the capm model

Reference no: EM13530630

Reference no: EM13530630

Questions Cloud

Reviews

Write a Review

Finance Basics Questions & Answers

Find what is the risk neutral rate of return

Given the following information create a monthly cash

Suppose you have 10000 in funds that you wish to invest in

How much will the firm pay its suppliers

Determination of company sustainable growth rate

What assumptions underlie the mm theory are these

To the nearest dollar how much must he save during each of

What is the variance of this portfolio

The risk-free rate on t-bills recently was 123 if the

Advantages of market order, limit order, and stop order.

What will flashbacks eps and pe ratio

Determine the debt level

Assured A++ Grade

Academics

Major Subjects

Majors

Get In Touch

TERMS & POLICIES

HELP & SUPPORT