1. The required return (using the constant growth dividend model) for a share of stock is equal to:
a. Next year’s dividend divided by the current price.
b. The increase in the value of a share of stock over one year.
c. The percentage rate at which a stock increases in value.
d. The capital gains yield plus the dividend yield.
e. The payment by a corporation to shareholders in the form of cash or stock.
2. Your opinion is that CSCO has an expected rate of return of 0.1375. It has a beta of 1.3. The risk-free rate is 0.04 and the market expected rate of return is 0.115. According to the Capital Asset Pricing Model, this security is
underpriced.
overpriced.
fairly priced.
Cannot be determined from data provided.