I need help figuring out what formulas to use so that I can understand how to compute the rate of return on the following questions. Please help with these multiple choice questions.

What is the rate of return for an investor who pays $1,054.47 for a three-year bond with a 7% coupon and sells the bond one year later for $1,037.19?
A) 5.00%
B) 5.33%
C) 6.46%
D) 7.00%

What price would you expect to pay for a stock with 13% required rate of return, 4% rate of dividend growth, and an annual dividend of $2.50 which will be paid tomorrow?
A) $27.78
B) $30.28
C) $31.10
D) $31.39

What is the required return for a stock that has a 5% constant growth rate, a price of $25, an expected dividend of $2, and a P/E ratio of 10?
A) 5%
B) 10%
C) 13%
D) 22%

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What is the rate of return for an investor who pays $1,054.47 for a three-year bond with a 7% coupon and sells the bond one year later for $1,037.19?
A) 5.00%
B) 5.33%
C) 6.46%
D) 7.00%

Answer: A) 5.00%

Coupon= $70
Purchase price= $1,054.47
Sale price= $1,037.19
Capital gain (loss)= ($17.28) =1037.19-1054.47

Coupon + Capital gain (loss)= $52.72 =70-17.28

Rate of return= 5.00% =52.72 / ...

Solution Summary

Answers and Explanations to Multiple choice questions on Rate of Return, Price of Stock, Required return for a stock

Consider the following information and then calculate the required rate of return for the Scientific Investment Fund, which holds 4 stocks. The market's required rate of return is 15.0%, the risk-free rate is 7.0%, and the Fund's assets are as follows:
StockStock Investment Beta
A

____ 28. Here are the expected returns on two stocks:
Returns
Probability X Y
0.1 -20% 10%
0.8 20 15
0.1 40 20
If you form a 50-50 portfolio of the two stocks, what is the portfolio's standard deviation?
a. 16.5%
b. 10.5%
c. 13.4%
d. 8.1%
e. 20.0%

Suppose the rate of return on short-term government securities (perceived to be risk-free) is 5%. Suppose also that the expected rate of return required by the market for a portfolio with a beta of 1 is 12%. According to the CAPM
1. What is the expected rate of return on the market portfolio?
2. Suppose you consider buyi

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A) What should be the market price of the stock?
B) If the current market price of the stock is $2

Next years dividend for ERT stock is expected to be $4.00. You expect it to be $4.00 in 2 years, also, but then you expect it to grow at an 8% annual rate forever. The required rate of return for years t=0 through t=2 is .20. The required rate of return for year t=3 onward is .25. What is the price of the stock today?

A company paid a dividend of $1.20 for 2006 and has a beta of 1.2. It is expected to increase its dividend at an 8% annual rate for the foreseeable future. The expected return for the market (portfolio) is 14% and the risk-free rate is 5%.
a) Using the Capital Asset Pricing Model, what is the stock's value?
b) If the com

Buttercup's N More wants to offer some preferred stock that pays an annual dividend of $2.00 per share. The company has determined that stocks with familiar characteristics provide a 9 percent rate of return. What price should Buttercup's expect to receive per share for this stock offering?

Woidtke Manufacturing's stock currently sells for $20 a share. The stock just paid a dividend of $1.00 a share (i.e, D0 = $1.00). The dividend is expected to grow at a constant rate of 10% a year. What stockprice is expected 1 year from now? What is the required rate of return on the company's stock?