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- Questions: Compute the expected intrinsic price of each stock in year 5. Assume that All stocks are fairly priced such that the intrinsic and market values are equal. Dividends are paid at the beginning of the year How many units of each stock will Stephanie buy? Support your response with relevant computations. What will be the total investment cost for shares? Show appropriate calculations. Which bonds are acceptable for investment? Justify your response with suitable computations. What will be the total cost of investment in bonds? Do the stock and bond investments fall within Stephanie’s investment guidelines? Show appropriate computations in support of your response. Will Stephanie have enough funds for her investment in stocks and bonds, when needed? What will be the surplus / shortfall, if any? Given that Stephanie’s bank offers an interest rate of 6% per year, what additional amount should she have deposited as a fixed…A stock you are evaluating is expected to experience supernormal growth in dividends of 12 percent over the next three years. Following this period, dividends are expected to grow at a constant rate of 4 percent. The stock paid a dividend of $1.50 last year and the required rate of return on the stock is 11 percent. Calculate the stock's fair present value. (Do not round intermediate calculations.) Please show all the steps, including the equation(s).Show graphically how the capital stock will respond to(i) a permanent increase in output price;(ii) a temporary investment tax credit scheme that rebates a fraction r of the value ofinvestment.
- A share has a ßE of 1.2 and sells for a price Po= £50 today. It will pay a dividend di of £6 at the end of the year. Further assume that rr= 6% and E[rm] = 16%. So, assuming that capital markets are efficient, what will the share's expected price be at the end of the year? Explain.Many Exchange Traded Funds (ETFs) use indexes as their underlying benchmarks, so it is equally important to understand the different types of indexes. Your ETF investing strategy depends on them. The three main types of indexes are price-weighted, value-weighted, and pure unweight. Also the capital market contains different instruction the investors can use while executing their investment. Discuss the weighting methods used in index construction with their scheme?Task 2 a) Calculate the market price in equilibrium for an investment that in the period before had a dividend of SEK 10 with an expected growth rate of 3% per period indefinitely. The share has a risk-adjusted discount rate of 7%.
- Assume that the economy can experience high growth, normal growth, or recession. Under these conditions, you expect the following stock market returns for the coming year: State of the Economy High Growth Normal Growth Recession Probability 0.2 0.7 0.1 a. Compute the expected value of a $1,000 investment over the coming year. If you invest $1,000 today, how much money do you expect to have next year? What is the percentage expected rate of return? Return 45% 20% - 4% Instructions: Enter dollar values rounded to the nearest whole dollar and percentages rounded to one decimal place. The expected value is $ and the expected rate of return is b. Compute the standard deviation of the percentage return over the coming year. Standard deviation = = % % %. c. If the risk-free return is 7 percent, what is the risk premium for a stock market investment? Risk premiumAssume Gillette Corporation will pay an annual dividend of $0.64 one year from now. Analysts expect this dividend to grow at 12.7% per year thereafter until the 4th year. Thereafter, growth will level off at 1.6% per year. According to the dividend-discount model, what is the value of a share of Gillette stock if the firm's equity cost of capital is 7.2%? The value of Gillette's stock is (Round to the nearest cent.)Respond to the question with a concise and accurate answer, along with a clear explanation and step-by-step solution, or risk receiving a downvote. Q2 Briefly describe the difference in the bond market in general and the stock market in the context of investment and return. Why is corporate bond investment usually riskier than investing in US Treasury securities? Q3. Estimate the rate of return (yield to maturity) if you as an investor purchase a one-year US TN at the market price of $955 with an FV of $1,000. Make sure you show the numerical estimation by using the yield equation. Q4. Draw a hypothetical demand and supply curve for S&P 500 stocks and briefly explain the effects of unexpected increase in inflation rate caused by a sudden rise in energy prices. Q5. Draw a demand and supply curve of the loanable funds market and explain the effects on equilibrium prices and quantities of loanable funds in response to the situation described in Q4. Q6. Suppose the increase in…
- Define the term expected return?(Ch7) Historically, the default rate on a commercial loan is 20 percent. If a bank makes 100 commercial loans, what is the approximate probability that more than 25 loans will result in default? (hint: use the normal approximation to the binomial. And, by continuity correction, you should use 25.5 as the new cutoff.) Question 2Select one: a. 0.0668 b. 0.0838 c. 0.2000 d. 0.0336a) Expectation of return from investment has two things, one is 'Liquidity preference' and 'Abnormal Return'. Which one do you prefer? Explain why. b) As a rational investor in which process would you like to utilize for your investment decision?