a. flat, flat
b. dividend payout ratio/ plow back ratio = 1 - 0.4 = 0.6
expected dividend = 3*0.6=1.8 $
growth rate= 0.4* 10% = 4%
value = $ 1.8 /( 0.12- 0.04) = $ 22.5
p/e = $ 22.5/ $ 3 = 7.5
c. roe ( 1- pay out ratio) =growth rate
0.15(1-0.30) = 0.15*0.7= 0.105 or 10.5%
If the expectation of short-term interest rate remains the same in the future, the expectations theory...
If the expectation of short-term interest rate remains the same in the future, the expectations theory predicts that the yield curve will be while the liquidity preference theory predicts that the yield curve will be_ A B. C. D. Flat; flat Upward sloping; upward sloping Flat; upward sloping Upward sloping; flat The market capitalization rate on the stock of Aberdeen Wholesale Company is 12%. Its expected ROE is 10% am dots expected EPS is $3.00. if the firm's plow-back ratio...
The market capitalization rate on the stock of Aberdeen Wholesale Company is 9%. Its expected ROE is 10%, and its expected EPS is $3. If the firm's plowback ratio is 65%, its P/E ratio will be _________. 10.37 19.87 14.00 40.00
An economist expects short-term rates to remain unchanged over the next several years. The economist would most likely predict an upward sloping yield curve if he believes which term structure theory applies? a) Local expectations theory. b) Liquidity preference theory. c) Unbiased expectations theory. ОА OB OC QUESTION 41 If the spot rate curve is upward sloping, then: a) The forward curve lies above the spot curve and the yield to maturity will be lower than the spot rate with...
8. The expectations theory suggests that: the yield curve should usually be downwardr sloping the slope of the yield curve depends on the expected future path of short-term rates. the slope of the yield curve reflects the risk premium incorporated into the yields on long-term bonds. the yield curve should usually be upward-sloping. A. B. D.
5. Assume the following interest rates Current Rate on a 1-year bond due in 2019: 4% Expected Rate on a 1-year bond due in 2020: 5% Expected Rate on a 1-year bond due in 2021: 6% Expected Rate on a 1-year bond due in 2022: 4% Expected Rate on a 1-year bond due in 2023: 2% a. According to the expectations theory for the yield curve, what would be the current rate on a 3-year bond due in 2021? Show...
Which of the following statements about the term structure of interest rates is incorrect? A. According to the Liquidity Preference Theory, long-term interest rates are usually higher than short-term interest rates. B. The Market Segmentation Theory posits that bonds of different maturities are traded by different investors and their prices/yields are determined separately. C. The Pure Expectations Theory asserts that the yield curve is explained solely by investors' interest rate expectations. D. According to the Pure Expectations Theory, an upward...
- - higher interes in the long-term where My Pe Theory Market Netto They The Curve Theory None of the above fequitymarkets are strong form Micient Investors should chose quity portfolios randomly Investors should put money only in professionally managed equity portfolios Investors should not invest in equity securities Investors should invest in stocks with high P raties Investors should form portfolios that are well diversified and appropriate for their own levels of risk tolerance TO To apply the Dividend...
The real risk-free rate, r*, is expected to remain constant at 3% per year. Inflation is expected to be 2% per year forever. Assume that the expectations theory holds; that is, there is no maturity risk premium. Treasury securities do not require any default risk or liquidity premiums. Which of the following is most correct? The Treasury yield curve is flat and all Treasury securities yield 5%. The Treasury yield curve is upward sloping for the first 10 years, and then downward sloping....
Consider the expectations theory of the term structure. Assuming that the short-term (1 period) interest rate today is 2 percent, and that the short- term (1 period) interest rates are expected to be 3 percent and 4 percent in the next years, what is the 3-period interest rate today? O2 percent 5 percent 3 percent 09 percent
2. Which of the following statements is CORRECT? a. If the maturity risk premium (MRP) is greater than zero, the Treasury bond yield curve must be upward sloping. b. If the maturity risk premium (MRP) equals zero, the Treasury bond yield curve must be flat. e. If inflation is expected to decrease in the future and the maturity risk premium (MRP) is greater than zero, the Treasury bond yield curve must be downward sloping d. If the expectations theory holds,...