1. Suppose you purchased a share of SNAP for $40 in January. You expect to sell it for $42 in December and expect to receive a dividend of $2.42 during that year. What is your expected HPR? Once the analyst has calculated it, what does Intrinsic Value tell us? 1. When intrinsic value exceeds market price, the stock is 2. When intrinsic value is lower than the market price, the stock is 3. You expect the price of SNAP to be $59.77 a year from now. Its current market price is $50 and you expect it to pay a dividend of $2.15 per share one year from now. 1. What are the stock's expected dividend yield, rate of price appreciation, and expected return? 2. If the stock has a beta of 1.15, the risk-free rate is 6%, and the expected rate of return on the market portfolio is 14%, what is the required rate of return? 3. What is the intrinsic value of Snap and what would you compare it to? Terms (fill out in your own words): 4. 1. Book Value 5. 2. Relative Value 6. 3. Intrinsic Value 7. 4. Market Capitalization Rate, k Problems to work through 8. 1. If a security is underpriced (i.e., intrinsic value > price), then what is the relationship between its market capitalization rate and its expected rate of return? (book 3) 9. 2. GE has a beta to the market of 1.1. The risk-free rate is 4% and the market risk premium for is 7%. If GE's dividend next year is expected to be $2.50 and its share price is expected to be $50, what is GE's intrinsic value? What else do you need to know to determine if GE is rich or cheap? 10. 3. The risk-free rate of return is 5%, the expected rate of return on the market is 10%, and MarketBeta stock has a market sensitivity of 1.5. If next year, MarketBeta is expected to have a dividend per share of $3.75 and reach a price of $75, at what price should a share sell for today?