The following information is available in general and aboutinvestments 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 Kindividually?
b. What is the expected return on the portfolio?
c. If Stock K just paid a dividend of $2.50, what is Stock K'sintrinsic value?
The following information is available in general and aboutinvestments 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 Kindividually?
b. What is the expected return on the portfolio?
c. If Stock K just paid a dividend of $2.50, what is Stock K'sintrinsic value?
Related questions
Cartwright Brothersâ stock is currently selling for $40 a share.The stock is expected to pay a $4 dividend at the end of the year.The stockâs dividend is expected to grow at a constant rate of 7percent a year forever. The risk-free rate (kRF) is 7 percent andthe market risk premium (kM â kRF) is 5 percent. What is thestockâs beta?
| a. | 5.00 | |
| b. | 1.00 | |
| c. | 2.00 | |
| d. | 3.00 | |
| e. | 4.00 |
You own a portfolio that has $2,300 invested in Stock A and $3,400 invested in Stock B. Assume the expected returns on these stocks are 9 percent and 15 percent, respectively.
What is the expected return on the portfolio? (Do not round intermediate calculations and enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Expected return on the portfolio
Stock J has a beta of 1.3 and an expected return of 13.66 percent, while Stock K has a beta of .85 and an expected return of 10.6 percent. You want a portfolio with the same risk as the market.
What is the portfolio weight of each stock? (Do not round intermediate calculations and round your answers to 4 decimal places, e.g., 32.1616.)
| Stock J | ||||||||||||||||||||||
| Stock K | ||||||||||||||||||||||
| Information on Gerken Power Co., is shown below. Assume the companyâs tax rate is 35 percent.
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| 1) A portfolio is invested 10 percent in Stock G, 50 percent in Stock J, and 40 percent in Stock K. The expected returns on these stocks are 7 percent, 13 percent, and 15 percent, respectively. What is the portfolio's expected return? (Round your answer to 2 decimal places. (e.g., 32.16))
4) A stock has an expected return of 15.5 percent, its beta is 1.65, and the expected return on the market is 12.6 percent. What must the risk-free rate be? (Round your answer to 2 decimal places. (e.g., 32.16))
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