Question: Part a: XYZ common stock is expected to pay a dividend of $1.05 next year, and that dividend grows at a constant rate of 9.5 percent. If the current price of XYZ common stock is $78.41, then what is the expected rate of return for this stock, based on the Discounted Cash Flow model? (Show your answer in DECIMAL FORM to three decimals, e.g., 12.3% would be entered as 0.123).
Part B: The total expected return on the entire stock market is 8 percent and U.S. Treasuries are yielding 3.2 percent. What is the expected return on a stock with a beta of 2.5? (show your answer in decimal form to four places, i.e., 12.34% would be entered as 0.1234)