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Please show all the calculations Problem 2 (10 pts) Based on the below information, kindly answer the below questions: - The Market Expected return and
Please show all the calculations
Problem 2 (10 pts) Based on the below information, kindly answer the below questions: - The Market Expected return and standard deviation are as per the below: - E(rM)=12% and M=22% - The Risk-Free rate is equal to 3.25% - Stock D has a standard deviation ( D ) equal to 52%. a) A share of stock A sells for $120 today. It will pay a dividend of $5 per share at the end of the year. Investors expect the stock to sell for $150 at the end of the year. What should be Stock A beta? ( 2pts) b) Stock B sells for $77 today. It will pay a dividend of $D1 per share at the end of the year. Investors expect the stock to sell for $82 at the end of the year. What do investors expect the stock dividend to be by the end of the year? ( 2 pts) c) A share of stock C sells for $66 today. It will pay a dividend of $2.5 per share at the end of the year. Investors expect the stock to sell for $S1 at the end of the year. What do investors expect the stock to sell for at the end of the year? ( 2 pts) d) The correlation between stock D returns and the market returns is equal to 0.44. I. What should be Stock D beta? (2 pts) II. What should be Stock D expected rate of return? (2 pts)Step by Step Solution
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