1. There are two stocks you are considering to buy: Stock A and Stock B. Stock A has has a beta of 1.2 and Stock B has a beta of 3.7. Treasury Bills have a return rate of 5% and the market portfolio has a return of 11%. Compared to the less risky stock, the riskier stock is ?
A.) 15% lower expected rate B.) 14.3% higher expected rate C.) 14.4% higher expected rate D.) 15% higher expected rate E.) 14.4% lower expected rate
2. The beta of citadelof inc. stock is .50, wheras the risk free rate of return is 6%. If the expected market portfolio return is 16%, then what is the expected return on citadelof based on the CAPM?
A.) 11% B.) 10.67% C.)14% D.)11.66% E.)10.12%
3. A company just paid dividend of Do=3.50 for its stock. Companys dividend is expected to grow by 80% in the first year, by 30% in year 2, by 12% in year 3 and at a constant rate of 2% in year 4 and therafter. The required rate of return on this stock is 15%. What is the stocks current value?
A.) 60.47 B.) 66.32 C.) 62.42 D.)65.02 E.) 67.62