Please help with the following problems.
The beta coefficient for stock C is bC= .4, whereas that for stock D is bD= -.5. Stock D has a negative indicating that its rate of return rises whenever returns on most other stocks fall.
1. If the risk free rate is 9 percent and the expected rate of return on an average stock is 13 percent, what are the required rates of return on stocks C & D?
2. For stock C, suppose the current price Po is $25; the next expected dividend D1 is $1.50 and the stock's expected constant growth rate is 4 percent. Is the stock in equilibrium? What would happen if the stock was in equilibrium?© BrainMass Inc. brainmass.com March 4, 2021, 6:20 pm ad1c9bdddf
1.If the risk free rate is 9 percent and the expected rate of return on an average stock is 13 percent, what are the required rates of return on stocks C & D?
this is a question of CAPM: R = R(risk free) + ...
This posting helps with finance-related problems on capital budgeting. In a non-excel format, the calculations and formulas are clearly shown and the answers are computed.