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Finance: Stock evaluation.

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You expect the risk-free rate (RFR) to be 3 percent and the market return to be 8 percent. You also have the following information about three stocks.
Stock Beta Current Price Expected Price Expected Dividend
X 1.25 $ 20 $ 23 $ 1.25
Y 1.50 $ 27 $ 29 $ 0.25
Z 0.90 $ 35 $ 38 $ 1.00

a. What are the expected rates of return for the three stocks?
b. What are the estimated rates of return for the three stocks?
c. What is your investment strategy concerning the three stocks?

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Solution Summary

The problem deals with estimating the expected and estimated rates of return for three stocks.

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You expect the risk-free rate (RFR) to be 3 percent and the market return to be 8 percent. You also have the following information about three ...

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  • B. Sc., University of Nigeria
  • M. Sc., London South Bank University
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