QUESTION 10

Part A: If D1 = $1.25, g (which is constant) = 5.5%, and P0 = $44, What is the stocks expected price, 3 year from now?

a. 51.67

b. 52.52

c. 55.98

Part B: An investor has a portfolio containing two investments. The first is $300,000 invested in the ETF SPY (an ETF that tracks the S&P500, the market portfolio) and the second is $200,000 invested in a savings account with his bank. The risk-free rate is 4.0%, and the expected return on the market is 8.0%. You may assume that the savings account pays the risk-free rate.What is the portfolio's expected return (round to 2 decimal place)?

		a. 6.22%
		b. 6.40%
		c. 6.46%
		d. 6.67%
		e. 6.86%