What would she be willing to pay for the risky portfolio

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1-) You expect the IBM to hit $120 per share with expected dividends of $2.50 in one year.Its current price is $105 and your research estimates the beta at 1.15 . Market risk premium is .07 and the U.S  T-bill is expected to yield .05 .Is the IBM a good investment? Conduct security analysis using the CAPM. Explain your answer.

2-) What would be the intrinsic value of X stock if :

The stock just paid a dividend of $3 and it will grow 5% annually for the next 2 years and will grow 3% thereafter. Assume 8% required rate of return for the stock.

3-)An investor can choose to invest in T-bills paying 5% or a risky portfolio with end-of-year cash flow of$132,000 . If the investor requires a risk premium of 5%, what would she be willing to pay for the risky portfolio?

4-) Discuss concepts covariance and correlation. How do these concepts differ in terms of calculation and interpretation?

5-) Discuss the differences between investors who are risk averse,risk neutral and risk loving.

Reference no: EM13211321

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