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Sorry again this question has already been posted, I just missed posting Problem 1-4. So here is the entire problem. I promise. Thanks. Security A

Sorry again this question has already been posted, I just missed posting Problem 1-4. So here is the entire problem. I promise. Thanks.

Security A has an expected return of 7%, a standard deviation of returns of 35%, a correlation coefficient with the market of -0.3, and a beta coefficient of -1.5. Security B has an expected return of 12%, a standard deviation of returns of 10%, a correlation with the market of 0.7, and a beta coefficient of 1.0. Which security is riskier? Why?

Problem 1-2

Assume the risk-free rate is 6% and that the expected return on the market is 13%. What is the required rate of return on a stock that has a beta of 0.7?

Problem 1-3

Suppose rRF = 5% rM = 10%, and rA = 12%

Calculate stock As beta.

If stock As beta were 2.0, then what would be As new required rate of return?

Problem 1-4

Thess Industries just paid a dividend of $1.50/ share (i.e., D0 = $1.50) The dividend is expected to grow 5%/ yr for the next 3 years and then 10%/ yr thereafter. What is the expected dividend/ share for each of the next 5 years?

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