Question

In: Finance

Question 1: R&r Stock J Dividends Stock Price Year 1 - $40.00 Year 2 $2.00 $49.50...

Question 1: R&r

Stock J	Dividends	Stock Price
Year 1	-	$40.00
Year 2	$2.00	$49.50
Year 3	$2.20	$53.20
Year 4	$2.40	$52.75
Year 5	$2.60	$55.80

Stock Fillion	Dividends	Stock Price
Year 1	-	$45.00
Year 2	$3.10	$51.05
Year 3	$3.20	$58.95
Year 4	$3.90	$57.92
Year 5	$4.05	$50.10

a) Find the following for Fillion and Jessica and a portfolio with 60% invested in Fillion and 40% in Jessica:

- Variance

- Standard Deviation

- Average Variance

- Average Standard Deviation

Find E(r).

b) Repeat (a) with 50% invested in each stock. Do we guess that the correlation coefficient will be closer to -0.95, 0.0, or 0.95?

c) If stocks are added at random, which of the following is true?

- Eventually portfolio variance will be reduced to 0

- Eventually portfolio variance will be reduced to a non-zero number and won’t decrease further

- Portfolio variance will stay constant

- Portfolio variance will increase with each added stock

Expert Solution

see excel image

GO THROUGH IT. ANY DOUBTS, FEEL FREE TO ASK. GIVE POSITIVE FEEDBACK

jeff jeffy answered 2 years ago

Two stocks has the following year-end stock prices and dividends: Stock 1 Stock 2 Year Price...

Two stocks has the following year-end stock prices and dividends: Stock 1 Stock 2 Year Price Dividend Price Dividend 1 $70 $150 2 $75 $1 $163 $2 3 $74 $1 $156 $2 4 $80 $2 $173 $1 Which stock has a higher annual average capital gain yield over the four years? Which stock has a higher average dividend yield?If T-bill rate is 2.0 percent, which stock has a higher average nominal risk premium based on the annual average total return?What...

The expected dividends for a stock are: Year 1=$2, Year 2=$3, after Year 2, we expect...

The expected dividends for a stock are: Year 1=$2, Year 2=$3, after Year 2, we expect dividends to grow by 6% forever. If we require an annual return of 8% from this stock, what would be the value of the stock to us? If it sells for $30 in the market, should we buy it?

A stock is expected to pay the following dividends: $1 in 1 year, $1.5 in 2...

A stock is expected to pay the following dividends: $1 in 1 year, $1.5 in 2 years, and $1.8 in 3 years, followed by growth in the dividend of 7% per year forever after that point. The stock's required return is 14%. The stock's current price (Price at year 0) should be $____________. A stock is expected to pay the following dividends: $1.3 four years from now, $1.5 five years from now, and $1.8 six years from now, followed by...

Consider a stock with a beginning of the year price of 21. The stock's dividends and...

Consider a stock with a beginning of the year price of 21. The stock's dividends and quarterly stock price are as follows: Quarter Dividend End of period stock price. 1 1 23 2 2 22 3 1 22 4 1 22 The effective annual yield on this stock is ____________.

J firm issues preferred dividends at an annual rate of $5.62. Its current preferred stock price...

J firm issues preferred dividends at an annual rate of $5.62. Its current preferred stock price is $26.67. Assume that the equity beta for JJ is 0.95. The Yield on 10-year treasuries is 3.41%, and that the market risk premium for the year is 6%. The company's EPS expected growth is 2%. For this year, the dividends for JJ firm are the same for common and preferred stock; additionally the price for common stock is $33. What is the common...

A stock has had the following year-end prices and dividends: Year Price Dividend 1 $ 64.23...

A stock has had the following year-end prices and dividends: Year Price Dividend 1 $ 64.23 — 2 71.10 $ .58 3 76.90 .63 4 63.17 .69 5 72.91 .78 6 78.75 .85 What are the arithmetic and geometric returns for the stock? (Do not round intermediate calculations and enter your answers as a percent rounded to 2 decimal places, e.g., 32.16.) Arithmetic average return % Geometric average return %

Lawrence comp paid $2.00 per share in common stock dividends last year. The company will allow...

Lawrence comp paid $2.00 per share in common stock dividends last year. The company will allow its dividend to grow at 8 percent for 7 years, and after that the rate of growth will be 6 percent forever. What is the value of the stock if the required rate of return is 10 percent? the Lawrence company is subject to capital rationing and has a capital budget of $2,000,000; the firm's cost of capital is 16 percent. USE EXCEL FORMULAS...

A stock is expected to pay the following dividends: $1.0 in 1 year, $1.5 in 2...

A stock is expected to pay the following dividends: $1.0 in 1 year, $1.5 in 2 years, and $2.0 in 3 years, followed by growth in the dividend of 5% per year forever after that point. The stock's required return is 12%. The stock's current price (Price at year 0) should be $____________.

A stock is expected to pay the following dividends: $1.1 in 1 year, $1.6 in 2...

A stock is expected to pay the following dividends: $1.1 in 1 year, $1.6 in 2 years, and $1.9 in 3 years, followed by growth in the dividend of 6% per year forever after that point. The stock's required return is 14%. The stock's current price (Price at year 0) should be $____________.

If you expected a stock price to be 55 SAR, 5% is the dividends’ growth rate, and this stock pay dividends of 2 SAR.

If you expected a stock price to be 55 SAR, 5% is the dividends’ growth rate, and this stock pay dividends of 2 SAR. What is the discount rate? 2- If the dividends’ growth rate is 2%, and this stock pay current dividends (D0) of 2 SAR, discount rate is 4%. Calculate the value of this stock.