Please give a brief explanation on why these are the correct answers. Question 5: You believe...

Please give a brief explanation on why these are the correct answers.

Question 5: You believe that Imani Inc’s stock will have an expected return of 18.2%. The company is expected to pay a dividend of $1.60 per year. The current market risk premium is 7%, what should you be willing to pay for the stock? Correct Answer: $8.79

Question 6: Suppose you invest 50% of your portfolio in Dorsey Pharmaceuticals which has a beta of 0.63, 25% of your portfolio in Elesha Essential Elements which has a beta of 1.18, and the remainder of your portfolio in Fajah Family Jewels which has a beta of 2.34. If that is your entire portfolio, what is the portfolio’s beta? Correct Answer: 1.20

Question 9: You are considering buying a Bertena Corp. bond with a $1000 face value, 13% annual coupon that has 17 years left until maturity. The bond has a yield to maturity of 9%. What is the fair price of this bond? Correct Answer: $1,341.75

Question 13: The expected return of the S&P 500 Index is 6% and a Treasury Bill currently has an expected return of 1.5%. According to stock analysts, Debara Corp stock has a beta of 1.3. Which of the following is true. Correct Answer: You should buy the stock if you believe that Debara Corp’s expected return is 8%.

Question 15: Gardenia Gardening Supply stock is expected to pay a dividend of $1.20 and the dividend is expected to grow at a rate of 3%. The stock’s required rate of return is 7%. The current risk-free rate is 2.4%. What is intrinsic value of the stock today? Correct Answer: P0= $1.2/ (.07-.03)

Question 18: If D₁ = $5.00, g (which is constant) = 4.5%, and P₀ = $473, what is the stock’s expected total return for the coming year? Correct Answer: 5.56%

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