Question
Part B: The Crescent Corporation just paid a dividend of $2 per share and is expected to continue paying the same amount each year for
Part B: The Crescent Corporation just paid a dividend of $2 per share and is expected to continue paying the same amount each year for the next four years. If you have a required rate of return of 13%, plan to hold the stock for four years, and are confident that it will sell for $30 at the end of four years, how much should you offer to buy it at today?
Part C: Use the information in the following table to answer the questions below:
State of Economy Probability of State Return on A in State Return on B in State Return on C in State Boom .35 0.040 0.210 0.300 Normal .50 0.040 0.080 0.200 Recession .15 0.040 -0.010 -0.260
a. What is the expected return of each asset?
b. What is the variance of each asset?
c. What is the standard deviation of each asset?
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