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I need this question repeated because last time I posted this question. I could barely read the answer. Please can you answer the question as if I am doing it by hand using the calculater

1. Stock A tends to be 50% more volatile vs. ... the General Market. If T-Bills are paying approximately 2%..., please determine the % Required Rate of Return on Stock A assuming that the Market Premium is 12%.

2. For the immediately preceding problem, please determine the Expected % Return on the General Market.

3. Based upon Problems # 1 and # 2 above, if the Expected % ... Return is 14%, should one invest in Stock A ? Why or why not ?

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Nelly Stracke
Nelly StrackeLv2
28 Sep 2019

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Please can you make sure that this answer is correct the first time. I always have to repeat the questions.

Firm C Stock tends to be 30% more volatile vs. the General Market. The S & P 500 is expected to yield a 12% Rate of Return. If T-Bills yield a 2% ... Return, what is the Required Rate of Return on Stock C ?

Please review this question it is answered in three questions. Please make sure it is correct I sometimes have to repeat the question.

5. Firm C Stock tends to be 30% more volatile vs. the General Market. The S & P 500 is expected to yield a 12% Rate of Return. If T-Bills yield a 2% ... Return, what is the Required Rate of Return on Stock C ?

6. Assume that Stock C above is expected to yield a 14% ... Return. Should one invest in Stock C ? Why or why not ?

7. Assume that Stock C above just paid a $ 4.00 Dividend Per Share. The Growth Rate for each of the next 3 years is 5% annually. Beyond Year 3, growth will level off at 2% per year indefinitely. What is the Stock Price for each share of Stock C ?

Consider the following statement to answer Questions i-iv: You manage a risky portfolio with an expected rate of return of 17% and a standard deviation of27%. The Treasury-bill rate is 7%. (i) One of your clients chooses to invest 70% of a portfolio in your fund and 30% in a T-bill moneymarket fund. What is the expected value and standard deviation of the rate of return on yourclient’s portfolio?(2 marks) (ii) Suppose that your client decides to invest in your portfolio a proportion y of the total investmentbudget so that the overall portfolio will have an expected rate of return of 15%. (a) What is the proportion y? (Hint: Use CAPM formula) (b) Further suppose that your risky portfolio includes the following investments in the givenproportions: Stock A (27%), Stock B (33%), and Stock C (40%). What are your client’sinvestment proportions in your three stocks and the T-bill fund?(2 marks) (iii) Now suppose that your client prefers to invest in your fund a proportion ythat maximizes theexpected return on the overall portfolio subject to the constraint that the overall portfolio’sstandard deviation will not exceed 20%. (a) What is the investment proportion, y? (b) What is the expected rate of return on the overall portfolio?(2 marks) (iv) Suppose that your client’s degree of risk aversion is A = 3.5. What proportion, y, of the totalinvestment should you suggest that he invest in your fund?(2 marks) (v) The market price of a security is $40. Its expected rate of return is 13%. The risk- free rate is 7%and the market risk premium is 8%. What will be the market price of the security if itscovariance with the market portfolio doubles (and all other variables remain unchanged)?Assume that the stock is expected to pay a constant dividend in perpetuity.(2 marks) QUESTION 2: OMEGA Currently Omega Corporation’s shares are selling at $60 per share and company is paying $5 per share dividend. Dividends are expected to grow at an annual rate of 3% for foreseeable future. Required rate of return for investors is 12% At the same time, Heller Corporation’s shares are selling at $58 per share and company is paying $4 per share dividend. Dividends are expected to grow at an annual rate of 5% for foreseeable future. Required rate of return for investors is 12% a) Calculate the current value of each stock on the basis of Dividend Discount Model. b) On the basis of above calculation, determine either each stock is overvalued or undervalued. (5 marks)

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