Question
1.You're analyzing the stock of a certain company. The most recent dividend paid was $6 dollars per share. The company's discount rate is 10%, and
1.You're analyzing the stock of a certain company. The most recent dividend paid was $6 dollars per share. The company's discount rate is 10%, and the firm is expected to grow at 5% per year forever. What should be the stock price today?
2. Assume that as an investor, you decide to invest part of your wealth in a risky asset that has an expected return of 12%, and a standard deviation of 15%. You invest the rest of your capital in the risk-free rate, which offers a return of 3%.
You want the resulting portfolio to have an expected return of 8%. What percentage of your capital should you invest in the risky asset?
3. Assume that as an investor, you decide to invest 11% of your wealth in a risky asset that has an expected return of 10%, and a standard deviation of 13%. You invest the rest of your capital in the risk-free rate, which offers a return of 4%.
What is your portfolio's expected return?
4.Assume that as an investor, you decide to invest 58% of your wealth in a risky asset that has an expected return of 9%, and a standard deviation of 15%. You invest the rest of your capital in the risk-free rate, which offers a return of 2%.
What is your portfolio's standard deviation?
5. Given an optimal risky portfolio with expected return of 17% and standard deviation of 11% and a risk free rate of 3%, what is the slope of the best feasible CAL?
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