Question Details

What is the stock's expected total return for the coming year 



1. Yonan Corporation's stock had a required return of 11.50% last year, when the risk-free rate was 5.50% and the market risk premium was 4.75%. Now suppose there is a shift in investor risk aversion, and the market risk premium increases by 2%. The risk-free rate and Yonan's beta remain unchanged. What is Yonan's new required return? (Hint: First calculate the beta, then find the required return.)
a.	14.03% 

b.	14.38% 
c.	14.74% 

d.	15.10% 

e.	15.48% 

2. You hold a diversified portfolio consisting of a $5,000 investment in each of 20 different common stocks. The portfolio beta is equal to 1.12. You have decided to sell a lead mining stock (b = 1.00) at $5,000 net and use the proceeds to buy a like amount of a steel company stock (b = 2.00). What is the new beta of the portfolio?
a.	1.1139 

b.	1.1725 

c.	1.2311 
d.	1.2927 

e.	1.3573 

3. A stock just paid a dividend of D0 = $1.75. The required rate of return is rs = 12.0%, and the constant growth rate is g = 4.0%. What is the current stock price?

a.	$20.56 

b.	$21.09 
c.	$21.63 

d.	$22.18 

e.	$22.75 

4. If D0 = $2.75, g (which is constant) = 3%, and P0 = $36, What is the stock's expected total return for the coming year ?

a.	9.82% 

b.	10.07% 

c.	10.33% 

d.	10.60% 

e.	10.87% 

5. Gary Wells Inc. plans to issue perpetual preferred stock with an annual dividend of $6.50 per share. If the required return on this preferred stock is 6.5%, at what price should the stock sell?
a.	$90.37 

b.	$92.69 
c.	$95.06 

d.	$97.50 

e.	$100.00 



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