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Required: a. You expect the Risk Free Rate to be 10% and the market return to be 14%. Compute the expected return for the following
Required: a. You expect the Risk Free Rate to be 10% and the market return to be 14%. Compute the expected return for the following stocks. (3 marks) Stock Beta U 0.85 IN 1.25 D -0.2 b. You ask a stockbroker what the firm's research department expects for these three stocks. The broker responds with the following information: StockCurrent Price Expected Price Expected Dividend U 22 24 0.75 N 48 51 2 D 37 40 1.25 Calculate your estimated returns for the three stocks and indicate what actions you would take with regard to these stocks. Explain your decisions. (6 marks)
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