1. Using CAPM. A stock has a beta of 1.15, the expected return on the market is 11 percent, and the risk-free rate is 5 percent. What must the expected return on this stock be?
2. Since we discussed the four financial statements, lets look at the personal financial statement. How many of you have a budget that you use? Why or why not?
3. Using CAPM. A stock has an expected return of 10.2 percent, the risk-free rate is 4 percent, and the market risk premium is 7 percent. What must the beta of this stock be?
4. ABC will pay a dividend of $3.00 and dividends will grow by 8%. The risk free rate is 3.5%; the market risk premium is 7%. ABC's beta is 1.25. How much is the stock worth?