Stock investment using the capital asset pricing model

Assignment Help Financial Management

Reference no: EM131567516

1. A stock has an historical average return of 8.8%, and standard deviation of 6.8%. The market is expected to earn a 9.5% rate of return, and has a standard deviation of 5.9%. The stock's beta coefficient is 1.25, and the risk free rate of return is 2.5%. What is the required return for this stock investment using the capital asset pricing model?

2. A five-year corporate bond with a face value of $10,000 pays interest at a coupon rate of 4.0%. The required return for investing in this bond is 5.0%. At what market price will the bond sell?

3. A stock pays a current dividend of $2.50 per share. The dividend is expected to grow at a 3.0% rate, and investors require a return of 10.0% for this stock. At what price will the stock sell?

Reference no: EM131567516

Questions Cloud

Describe ocbcs unique approach to talent management : Analyze OCBC Bank after reading this the article. ?Describe OCBC's unique approach to talent management and development.

Describe the trade-off between the two technologies : Describe the trade-off between the two technologies and the reason why packet switching is more appropriate for the Internet.

The economy is just entering recession : Suppose you believe that the economy is just entering a recession. Your firm must raise capital immediately using debt (bonds).

Find an expression for the rate of climb of the aircraft : A realistic model for the climb performance of an Cessna aircraft taking off from an airport at sea level can be given by the relation H(t)=2000ln(t+1).

Stock investment using the capital asset pricing model : What is the required return for this stock investment using the capital asset pricing model?

Research the evolution of the telecommunications industry : Research the evolution of the telecommunications industry based on this week's Electronic Reserve Readings.

Define primary health care reform been constrained in canada : In what ways has primary health care reform been constrained in Canada

What are the issues associated with cross-layer routing : Explain how you would exploit the use of Ethernet based wireless and wired network to develop a hybrid network.

Write a summary of the rfp process after reading : Write a 350-word summary of the RFP process after reading about it in Ch. 2 of Project Management: The Managerial Process.

User Account

All Pages