Question 2

i)Assuming that Guinness Ghana Limited has just paid a dividend of GHS0.08 and expects to grow at a constant rate of 8% per year for the next three years and thereafter grow at a rate of 6% into the unforeseeable future. With a required rate of 12% what should the current price of Guiness Ghana Limited be?

ii) . State whether the following statements are True or false?

1. Investors in the Ghana Stock Exchange will prefer diversified companies because they are less risky.

2. If all the banking stocks on the Ghana Stock Exchange were perfectly positively correlated, diversification would not reduce risk.

3. A manager at Databank argues that diversification works only when assets are uncorrelated.

4. Fanmilk has a low standard deviation, therefore it will always contributes less to portfolio risk than a BOPP which has a higher standard deviation.

5. Samuel created a well-diversified portfolio from stocks on the Ghana Stock Exchange. The portfolio has a beta of 2.0 and this makes it twice as risky as the market portfolio.