46 liu. 1:10 Exercise.docx Lecturer Name Fatalmahep-hied Exercise 1 Ahmed has to take a decision to invest in either STC Stock or Zain Stock. For the STC Stock, The dividend distributed this year is 2 SR and it will grow at a constant rate (5%) and will continue for an infinite period. For Zain Stock, the dividend always stays the same, 3 SR for every year. The relative risk with the market for each stock (Beta) is given in the following table: STC Stock 0.75 Zain Sack 1.25 The market price for STC stock is 20 SR and for Zain stock is 26 SR As an investment analyst, which stock can you advice Ahmed to buy Note: The risk-free rate is 10% and the market return is 14% Exercise 2 Calculate the stock's intrinsic value in each case: a/ A company pays 5 SR per share dividend every year and there is no growth for the next years. The stock beta is 1.1, the risk-free rate is 10% and the market return is 14 9. b/ A company distribute this year 3 SR as a dividend per share. The policy of this company is to maintain a constant growth rate in its dividends (3%). The stock beta is 1.1, the risk-free rate is 10% and the market retur is 14 %