3. A stock produced returns of 4.6 percent, 11.9 percent, -23.2 percent, 0.9 percent, and 16.7...

3. A stock produced returns of 4.6 percent, 11.9 percent, -23.2 percent, 0.9 percent, and 16.7 percent over the past five years. What is the geometric average return on this stock for this time period? a. 11.17 percent b. 1.14 percent c. 0.74 percent d. 1.43 percent e. 5.28 percent

4. A stock had an average return of 13.7 percent compared to an average return on U.S. Treasury bills of 3.8 percent for the same time period. What is the equity risk premium on this stock? a. 17.50 percent b. 13.70 percent c. 3.61 percent d. 9.90 percent e. 7.73 percent

6. Bugatti, Inc is expected to pay a dividend of $2.40 next year and its current stock price is $48. The discount rate for the company is 11%. If the market expects Bugatti’s dividends to grow at a constant rate forever, then the growth rate must be _____% a. 5 b. 6 c. 7 d. 8 e. 9 16.

16. What is the current price of a share of stock that is expected to pay a dividend (i.e., D1) of $4.10 per share exactly one year from today, if the expected growth rate in the company’s earnings and dividends is expected to be 4.6% per year forever and the required rate of return for the stock is 16%?

17. What is the required rate of return (assuming equilibrium) of a share of stock that just paid a dividend (i.e., D0) of $0.75 per share, assuming that all future dividends are expected to grow at a rate of 4.2 percent per year forever? The stock currently sells for $24.18 per share.

18. What is the constant growth rate in the dividends (forever) of a share of stock that currently sells for $230.44, if the dividend just paid (i.e., D0) equals $22.10 and the required rate of return for the stock is 18.8%?

Expert Solution

jeff jeffy answered 8 months ago

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