As an equity analyst you are concerned with what will

Question

1. A dividend which is a return to stockholders of a portion of their original investments is a?

liquidating dividend.

liability dividend.

participating dividend.

property dividend.

2. As an equity analyst you are concerned with what will happen to the required return to Universal Toddler' stock as market conditions change. Suppose r_RF = 3%, r_M = 13%, and b_UT = 1.9.

a. Under current conditions, what is r_UT, the required rate of return on UT Stock? Round your answer to two decimal places.

b. Now suppose r_RF (1) increases to 4% or (2) decreases to 2%. The slope of the SML remains constant. How would this affect r_M and r_UT?

c. Now assume r_RF remains at 3% but rM (1) increases to 15% or (2) falls to 12%. The slope of the SML does not remain constant. How would these changes affect r_UT?