Calculation regarding the risk-free rate of return

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Recently, Kellie determined that the required rate of return for Stock Q is 11 percent. In her analy- sis, she determined that the risk-free rate of re- turn, rRF, is 4 percent and that the required return on the market portfolio, rM, is 9 percent. Today, however, Kellie received new information that in- dicates the market risk premium, RPM, is actually 1 percent higher than she estimated in her origi- nal analysis. Based on this new information, what should be the required rate of return for Stock Q?

High Energy (HE) Company recently paid a $2 per share dividend, which is expected to grow at a constant rate forever. HE's stock, which has a beta coefficient equal to 1.1, is selling for $37.50 per share. Currently, the risk-free rate of return is 4 percent, and the return on an average stock is 10 percent. If HE's stock is selling at its equilibrium price, what is its growth rate?

Reference no: EM13979494

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