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1. Spencer Supplies's stock is currently selling for $60 per share. The firm is expected to earn $5.10 per share this year and to pay a year-end dividend of $3.70.
If investors require a 8.5% return, what rate of growth must be expected for Spencer? Round your answer to two decimal places.
2. If Spencer reinvests earnings in projects with average returns equal to the stock's expected rate of return, then what will be next year's EPS? (Hint: g = ROE × Retention ratio.) Round your answer to the nearest cent.
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The risk-free rate is currently 2.8%. In one year the price of a given share of stock that currently trades at $40 per share is expected to either increase by 8% or decrease by 2%. What is the current value of a call on this stock with exercise price..
The key to efficient diversification is to build a portfolio of securities that are:
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