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Question 1: Solve the following (10 Marks) The real risk-free rate is 6...

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Finance

Question 1: Solve the following (10 Marks)

  1. The real risk-free rate is 6 percent. Inflation is expected to be 6 percent this year, 8 percent next year, and then 7 percent thereafter. The maturity risk premium is estimated to be 0.0005 X (t - 1), where t = number of years to maturity. What is the nominal interest rate on a 8-year Treasury security?

  1. What is the average rate of return and standard deviation, if the historical data for the years 2010; 2011; 2012; and 2013 tells that the realized rate of return for stock J was 18 %, (10%); 8 %; and 12 % respectively?

  1. Suppose kRF = 6%, kM = 11%, and kP = 14%. Calculate Stock Ps beta.

  1. Rs. 200 will take how many years to become Rs. 400, if I is 18 %

  1. Sun Corporation just paid a dividend of Rs4 a share. The dividend is expected to grow at a constant growth rate of 7 percent, and the required rate of return is 10%. What is the expected dividend per share for the next 2 years and the current share price

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