1. The expected return for OK Energy is 8.0% and the risk-free rate is 1.5%. The beta for OK Energy, Inc. is 1.4. If the CAPM/SML is correct, what is the expected return on the market (Rm)?
2. What would you pay for a stock which just paid a dividend of $0.50 if the expected dividend growth rate is 5% and you require a 8% return on your investment?
3. The beta for Cowboy Industries, Inc. is 1.2. The expected return on the market portfolio is 12.0% and the risk-free rate is 2.0%. If the CAPM/SML is correct, what is Cowboy Manufacturing’s required (expected) return?