Calculate the stock price (of the firm whose current dividend is $1 and is expected to grow at 10% a year for three years, it then grows to 8% for next three years. After six years the new growth rate is expected to be a constant 6% a year and discount rate is 10%. The market return is 6% and return on risk free bills is 2%. This firm has covariance (with the market) of 0.032 and variance of 0.015 or 1.5%.

Q3) What is meant by active and passive portfolio? Suppose you have invested 15 million, 5 million in each i.e. active, passive and market portfolios. RORs (for 5 weeks) for each portfolio given below. Draw the SML line by calculating excess returns for passive portfolio only. The annual T-bills rate for 3 months is 7%. Rank the portfolios using Sharpe ratio only. (15 marks) RORS Weeks Active Passive Index 0 1 2 3 4 5 2% 1 2 3 4 1% -2 0 2 2 1.5% 3 0 1 3 Q3) What is meant by active and passive portfolio? Suppose you have invested 15 million, 5 million in each i.e. active, passive and market portfolios. RORs (for 5 weeks) for each portfolio given below. Draw the SML line by calculating excess returns for passive portfolio only. The annual T-bills rate for 3 months is 7%. Rank the portfolios using Sharpe ratio only. (15 marks) RORS Weeks Active Passive Index 0 1 2 3 4 5 2% 1 2 3 4 1% -2 0 2 2 1.5% 3 0 1 3