Question 1. GE stock has a beta of 1.2 and a standard deviation of 18% per year. The market portfolio has an expected return of 11% and a standard deviation of 15% per year. If the risk free rate of return is 3% what is the expected return on GE stock according to the CAPM.
Question 2. Hewlett Packard (HPQ) has a constant rate of growth in dividends and earnings of 6% and a fixed dividend payout ratio of 40%. Last year, earnings were $6.40 per share. HPQ's share price is $70. What is the expected rate of return?
Question 3. For the fiscal year just ended, Georgia Pacific announced earnings of $5 per share and paid dividends of $1.25. Next year, earnings per share are forecasted to be $5.80 and dividends $1.40 per share. Analysts expect that the current, trailing p/e ratio of 16 will expand to the historical average of 18 next year. If they are correct, what is the expected rate of return (1year)?