Problem 11.14 – Risk and Expected Return
Fundamentals of Corporate Finance
Brealey, Myers, and Marcus
10th Edition
Find the stock’s expected return and standard deviation.
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Find the stock’s expected return and standard deviation.
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Find the sensitivity of the operating cash flow based on changes in quantity.
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Given the risk-free rate, the rate of return on the market portfolio, the stock’s beta, and the security’s expected return determine the required return and state whether or not the security is overpriced or underpriced.
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Problems 12.01 – 12.03 gives the initial price, dividend paid, and ending share price.
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Given the information on the bond, find your total dollar return, total nominal rate, and the total real rate of return.
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Find the average annual return on large-company stocks in nominal and real terms.
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Using long-term government bonds, corporate bonds, and inflation… find the historical real return on long-term government and corporate bonds.
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Given the stock returns, find the arithmetic and geometric average returns.
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Given the stock beta, stock selling amount, year-end dividend, T-bill rate, and market risk premium… calculate the stock price at the end of the year.
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Given the stock beta, stock selling amount, year-end dividend, T-bill rate, and market risk premium and what investors believe the stock will sell for…. find out if its a good or bad buy, if the investors will invest, and what price the stock will be at equilibrium.
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