A share has expected dividend stream of 10, 20 40 and then 0 from then on (bankruptcy). Its current price is 50. What is its required efficient marrket hypothesis rate of return?
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A share has expected dividend stream of 10, 20 40 and then 0 from then on (bankruptcy). Its current price is 50. What is its required efficient marrket hypothesis
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- What is the required rate of return on a share whose value is Kshs 62.50, its upcoming dividend is Kshs 5 and the growth rate is 4%?the dividend growth model may be use to value a stock v=Do(1+g) k-g a. what is the value of a stock if: Do=$2 k==10% g=6% b. what is the value of this stock if the dividend is increased to $3 and the other variables remain constant? c. what is the value os this stock if the required return decline to 7.5 percent and the other variables remain constant? d. what is the value of this stock if the growth rate declines to 4 percent and the other variables remin constant? e. what is the value of this stock if the dividend is increased to $2.30, the growth rate declines to 4 percent, and the required return remains 10 percent?The aggregate market currently has a retention ratio of 60 percent, a required rate of return of 12 percent, and an expected growth rate for dividends of 4 percent.If the payout ratio changes to 50 percent, but there are no other changes, what will be the new P/E?
- Now assume that the stock is currently selling at $30.29. What is its expected rate of return?A share price is modelled via a two-period binomial model with initial stock price S=40, up/down multiplication factors u = per time period r = 4%. and d = and interest rate Explain Does this model satisfy the no-arbitrage assumption? Write 0 if your answer is 'no' and 1 if your answer is 'yes'. Answer: your argument in your hand-written answer (b) Calculate the risk-neutral probabilities of up and down movements in the share price. State your answer to three valid digits. Answer: P = Pd= (c) to three valid digits. Answer: Determine the no-arbitrage price of a European call option on the share with strike price K = 70 and expiry time T = 2. State your answer Explain your calculation steps in your hand-written answer.The required return on a stock is equal to which one of the following if the dividend on the stock decreases by a constant percent per year? O Dividend yield - Capital gains yield O (PO/D1) - g O (D1/PO)/g Dividend yield x Capital gains yield O Dividend yield + Capital gains yield
- Suppose rRF = 4%, rM = 11%, and bi = 1.6. A. What is ri, the required rate of return on Stock i? Round your answer to one decimal place. % B. 1. Now suppose rRF increases to 5%. The slope of the SML remains constant. How would this affect rM and ri? Both rM and ri will decrease by 1 percentage point. Both rM and ri will remain the same. Both rM and ri will increase by 1 percentage point. rM will remain the same and ri will increase by 1 percentage point. rM will increase by 1 percentage point and ri will remain the same. C. Now suppose rRF decreases to 3%. The slope of the SML remains constant. How would this affect rM and ri? Both rM and ri will remain the same. Both rM and ri will decrease by 1 percentage point. rM will decrease by 1 percentage point and ri will remain the same. rM will remain the same and ri will decrease by 1 percentage point. Both rM and ri will increase by 1 percentage point. D. 1. Now assume that rRF remains at 4%, but rM increases to 12%.…Differentiate among the expected rate of return (r⁄), the requiredrate of return (r), and the realized, after-the-fact return (r) on astock. Which must be larger to get you to buy the stock, r⁄or r?Suppose TRF = 4%, TM = 9%, and b = 1.1. a. What is n, the required rate of return on Stock i? Round your answer to one decimal place. % b. 1. Now suppose rar increases to 5%. The slope of the SML remains constant. How would this affect ry and n? I. ry will increase by 1 percentage point and n will remain the same. II. Both ry and r, will decrease by 1 percentage point. III. Both rm and r, will remain the same.. IV. Both r and r, will increase by 1 percentage point. V. r will remain the same and r, will increase by 1 percentage point. -Select- v 2. Now suppose rar decreases to 3%. The slope of the SML remains constant. How would this affect ry and n? I. TM will decrease by 1 percentage point and n will remain the same. II. rs will remain the same and n will decrease by 1 percentage point. III. Both ry and r, will increase by 1 percentage point. IV. Both ry and r, will remain the same. V. Both ry and r, will decrease by 1 percentage point. Select
- Suppose rRF = 4%, rM = 9%, and bi = 1.5. What is ri, the required rate of return on Stock i? Round your answer to one decimal place. 1. Now assume that rRF remains at 4%, but rM increases to 10%. The slope of the SML does not remain constant. How would these changes affect ri? Round your answer to one decimal place. The new ri will be %. 2. Now assume that rRF remains at 4%, but rM falls to 8%. The slope of the SML does not remain constant. How would these changes affect ri? Round your answer to one decimal place. The new ri will be %.Assume the risk-free rate is 4% and the beta for a particular firm is 2, current firm share price is $35 and the market risk premium is 8%. A.Given the risk level, what is the one-year required rate of return (we will call this k)? B.If next year’s expected dividend is $3, use k from part A to solve for the expected next year’s price.Suppose rRF = 6%, rM = 10%, and bi = 1.8. What is ri, the required rate of return on Stock i? Round your answer to one decimal place. % 1. Now suppose rRF increases to 7%. The slope of the SML remains constant. How would this affect rM and ri? Both rM and ri will remain the same. Both rM and ri will increase by 1 percentage point. rM will remain the same and ri will increase by 1 percentage point. rM will increase by 1 percentage point and ri will remain the same. Both rM and ri will decrease by 1 percentage point. 2. Now suppose rRF decreases to 5%. The slope of the SML remains constant. How would this affect rM and ri? Both rM and ri will remain the same. Both rM and ri will decrease by 1 percentage point. rM will decrease by 1 percentage point and ri will remain the same. rM will remain the same and ri will decrease by 1 percentage point. Both rM and ri will increase by 1 percentage point. 1. Now assume that rRF remains at 6%, but rM increases to 11%.…