(a) An investor is considering a stock worth Rs.555 per share today that pays a 9% annual dividend .The stock has a beta compared to the market of 1.5, which means it is riskier than a market portfolio. Also, assume that the risk-free rate is 2% and this investor expects the market to rise in value by 8% per year. Calculate the expected return for the stock or how much the expected earnings of investor by investing in this stock?

(a) An investor is considering a stock worth Rs.555 per share today that pays a 9% annual dividend .The stock has a beta compared to the market of 1.5, which means it is riskier than a market portfolio. Also, assume that the risk-free rate is 2% and this investor expects the market to rise in value by 8% per year. Calculate the expected return for the stock or how much the expected earnings of investor by investing in this stock?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter8: Analysis Of Risk And Return

Section: Chapter Questions

Problem 14P

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