User Account

All Pages

What will happen if the stock is not in equilibrium

Assignment Help Finance Basics
Reference no: EM131102313

The beta coefficient for Stock C is bC = 0.4, whereas that for Stock D is bD = _0.5. (Stock D's beta is negative, indicating that its rate of return rises whenever returns on most other stocks fall. There are very few negative beta stocks, although collection agency stocks are sometimes cited as an example.) 
a. 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 and D?
b. For Stock C, suppose the current price, P0, 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? Explain, and describe what will happen if the stock is not in equilibrium.

Reference no: EM131102313

Questions Cloud

Explain the importance of each performance measurement : Given the statistics of Middleville and its two (2) competitors provided in Table 1, recommend to the HCO what areas it should focus on to maintain its competitive market share as well as continue to provide healthcare to the community in the 21st..
Hardware-software setup required : According to the Siles (2010), the huge adoption of wireless technologies over recent years has placed wireless data (or Wi-Fi) networks, based on the 802.11 specifications, as one of the major attack vectors for organizations nowadays. Incident h..
Ind the mse for the quantizer that you have found : Plot the 2D regions and representation points for both your scalar quantizer in part (a) and your vector quantizer in part (c).
Setup the layout of a webpage : Describe in detail how JavaScript can be used for input validation on the client side. Explain how the division element is used to setup the layout of a webpage.
What will happen if the stock is not in equilibrium : 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 and D? b. For Stock C, suppose the current price, P0, is $25; the next expected dividend, D1, is $..
Children diagnosed with autism : Do you think that children diagnosed with autism should be mainstreamed into regular classes or kept with other children that also have a developmental disorder?
Should health care be based on allocative -regulatory policy : How would you help solve one of the "challenges for heath policy" covered in the text? Give some examples of how one or more of these challenges have come in the way of advancing population health.
How does managements explanation enhance the usefulness : `How does management's explanation enhance the usefulness of financial accounting information?
Derive piecewise quadratic cumulative distribution function : What must the height h of the tent be, and why? Use your answer to derive a piecewise-linear function defining the probability density function p(x) for the domain x ∈ [0, 1]. Derive a piecewise quadratic cumulative distribution function cdf(x) for..

Reviews

Write a Review

Finance Basics Questions & Answers

  Evaluate how purchasers of financial futures contracts

Evaluate how purchasers of financial futures contracts can offset their position and how their gain or loss is determined.

  Total return of the bond in dollars

What's the bond price in one year (bond price at time point year 1)? What's the total return of the bond in dollars if you buy the bond now and sell it in one year? The coupon will be paid semiannually

  Find the costs of the individual capital components compute

cash2000000accounts payable and accruals18000000accounts receivable28000000notes

  What are the features of cost-volume profit

What are the features of cost-volume profit (CVP) analysis and why are managers interested in the break-even analysis point?

  Internal revenue code sections

Can the exhusband deduct the annual payments and, if so, is the deduction For AGI for From AGI? What Internal Revenue Code Sections answer these questions?

  Calculate a fair price for the stock of united sports

If the discount rate is 9%, calculate a fair price for the stock of United Sports, Inc.

  Currently a three-month treasury bill has a yield of 5

currently a three-month treasury bill has a yield of 5 while the yield on a ten-year treasury bond is 4.7. what is the

  At the end of the economic exercise corresponding to the

at the end of the economic exercise corresponding to the year 2012 a company presents the following financial statuses.

  Which of these motives are financially justifiable

Several factors have been proposed as providing motives for mergers, including (1) synergy, (2) availability of excess cash, (3) ability to purchase assets at less than replacement cost, (4) diversification, and (5) managers' personal incentives.

  Write the equation expressing the present value

Julie Orzabal deposits $5,000 in a savings account offering 5.125 percent compounded daily. Assuming she makes no further deposits, what will be the balance in her account after 5 years?

  A gold-mining firm is concerned about short-term volatility

a gold-mining firm is concerned about short-term volatility in its revenues. gold currently sells for 1592 an ounce but

  A year later interest rates have dropped and the bonds

suppose you buy a bond for 1020 with a 15-year maturity paying an annual coupon of 80. a year later interest rates

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd