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*********** Please help me answer all parts i really need help with this question. I will help rate and give thumbs up, Thank you. Assume
*********** Please help me answer all parts i really need help with this question. I will help rate and give thumbs up, Thank you.
Assume today is Dec. 315, 2020 and you observe that ECC Company's current stock price is $120. Analysts forecast that ECC's next dividend, to be paid at year-end of 2021, will be $2.50. You also find the following historic annual returns of the company's stock for the last 4 years. 2017 2018 2019 2020 ECC's Returns +50% +40% -10% -7% In addition, you have the following information: risk-free rate is 2% and the expected return on the market is 9.5%. a) Based on ECC's return in the last 4 years, calculate the arithmetic average return, geometric average return, and standard deviation of ECC's stock return. b) Assume you use the arithmetic average return you calculated in part a) as an estimation of the stock's future expected return, what should ECC stock's beta be according to the CAPM model? c) You are thinking of buying some ECC's stock. You assume that the arithmetic average return you calculated in part a) for ECC's stock is an accurate estimation for its future expected return. What price should you expect for its stock at the END of 2021, right after the next dividend of $2.50 is paid? Assume today is Dec. 315, 2020 and you observe that ECC Company's current stock price is $120. Analysts forecast that ECC's next dividend, to be paid at year-end of 2021, will be $2.50. You also find the following historic annual returns of the company's stock for the last 4 years. 2017 2018 2019 2020 ECC's Returns +50% +40% -10% -7% In addition, you have the following information: risk-free rate is 2% and the expected return on the market is 9.5%. a) Based on ECC's return in the last 4 years, calculate the arithmetic average return, geometric average return, and standard deviation of ECC's stock return. b) Assume you use the arithmetic average return you calculated in part a) as an estimation of the stock's future expected return, what should ECC stock's beta be according to the CAPM model? c) You are thinking of buying some ECC's stock. You assume that the arithmetic average return you calculated in part a) for ECC's stock is an accurate estimation for its future expected return. What price should you expect for its stock at the END of 2021, right after the next dividend of $2.50 is paidStep by Step Solution
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