Problem 12-03, Market turns out below expectations
Fundamentals of Corporate Finance
Brealey, Myers, and Marcus
10th Edition
Determine the rate of return on the stock given that the market turns out to be below expectations.
Determine the rate of return on the stock given that the market turns out to be below expectations.
Calculate the firm will be worth and how much you would overvalue the firm if your estimated beta is different than previously thought.
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.
Problems 12.01 – 12.03 gives the initial price, dividend paid, and ending share price.
Given the information on the bond, find your total dollar return, total nominal rate, and the total real rate of return.
Find the average annual return on large-company stocks in nominal and real terms.
Using long-term government bonds, corporate bonds, and inflation… find the historical real return on long-term government and corporate bonds.
Given the rate of returns for both scenarios of bust and boom, find the beta of each stock, the expected rate of return on the market portfolio and each stock, what the CAON says about the stocks fair expected rate of return, and which stock is the better buy. (Required; 4)
Given the stock returns, find the arithmetic and geometric average returns.
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.