1. Equity Market. (10 points) You are considering investing in a stock that has an...
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Accounting
1. Equity Market. (10 points) You are considering investing in a stock that has an expected return of 14.3%. If the risk-free rate is 10 percent and the market risk premium is 14 percent, what must the beta of this stock be? Describe beta as a sensitivity measure.
2. Dividend Discount Model. (10 points) Suppose you know that a company just paid a dividend of $5 per share on its stock and that the dividend will continue to grow at a rate of 10 % per year. If the required return on this stock is 15 %, what is the current share price?
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