-11a 5. A stock paying $5 in annual dividends sells now for $95 and has an...

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Answer 1

Answer #1

1)

Expected return = (D1 / price) + growth rate

0.11 = (5 / 95) + growth rate

0.11 = 0.052632 + growth rate

growth rate = 0.057368 or 5.7368%

Price in 1 year = 95 (1 + 0.057368)

Price in 1 year = $100.45

2)

Expected return = Risk free rate + beta(market return - risk free rate)

0.12 = 0.04 + beta(0.1)

0.08 = beta(0.1)

Beta = 0.8

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Answer 2

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