1. Uneven Cashflow Problem
How much would you pay for a stock that guarantees a dividend of $1 for the next 3 yrs, $1.50 in yr 4, and $2 in yr 5 & 6. You plan to sell the stock at the end of year 6 for $20 and you require a 10% rate of return on this stock.
2. Based on the data below, what is the market risk (Market E(R))? (format xx.xx% as needed)
Risk-Free Return 3.60%
Stock E(R) 9.20%
Stock Beta 1.23