What is the fair return on the stock

Reference no: EM133332207

Case: Remember that returns are expressed as percents. For all questions that ask for returns, convert a percent, and use 4 decimal places.

Also, the fair return is the one that is given from the CAPM. The market's expected return is based on the current price of the stock and expected cash flows (HPR).

Question:

A. A stock is currently selling for $94.90 and is expected to sell for $104.21 in 1 year. If the company pays a dividend of $0.55 what is the stock's HPR?

B. A stock has a beta of 0.79. The risk free rate is 1.694% and the market risk premium is 5%. What is the fair return on the stock?

Reference no: EM133332207

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