What is the expected return on the portfolio

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The following information is available in general and about investments in stocks J and K.

The market return (kM) = 9%
The risk free rate (kRF) = 5%
Stock J's beta = 0.8
Expected constant growth rate for Stock J = 6%
Investment in Stock J = $80,000
Stock K's beta = 1.4
Expected constant growth rate for Stock K = 7%
Investment in Stock K = $120,000

a. What are the expected returns on Stock J and Stock K individually?

b. What is the expected return on the portfolio?

c. If Stock K just paid a dividend of $2.50, what is Stock K's intrinsic value?

 

Reference no: EM13299575

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