Author Question: Stock A has a beta of 0.8 and Stock Bs beta is 1.2. The market risk premium is 8%, and the risk-free ... (Read 46 times)

tyratatyanna · **on:** Aug 7, 2023

Question 1

Sorenson Corp.’s expected year-end dividend is D₁= $1.90, its required return is r_s= 13.5%, its dividend yield is 9%, and its growth rate is expected to be constant in the future. What is Sorenson’s expected stock price in 8 years; that is, what is P₈?

◦

$21.36

◦

$24.95

◦

$28.50

◦

$30.02

Question 2

Stock A has a beta of 0.8 and Stock B’s beta is 1.2. The market risk premium is 8%, and the risk-free rate is 5.5%. Both stocks have a constant dividend growth rate of 9%. If the market is in equilibrium, which of the following statements is correct?

◦

Stock A must have a lower stock price than Stock B.

◦

Stock B could have the lower expected return.

◦

Stock B must have the lower required return.

◦

Stock A must have a lower dividend yield than Stock B.

khudija · **Reply #1 on:** Aug 7, 2023

A FREE account is required to view all solutions!

Lorsum iprem. Lorsus sur ipci. Lorsem sur iprem. Lorsum sur ipdi, lorsem sur ipci. Lorsum sur iprium, valum sur ipci et, vala sur ipci. Lorsem sur ipci, lorsa sur iprem. Valus sur ipdi. Lorsus sur iprium nunc, valem sur iprium. Valem sur ipdi. Lorsa sur iprium. Lorsum sur iprium. Valem sur ipdi. Vala sur ipdi nunc, valem sur ipdi, valum sur ipdi, lorsem sur ipdi, vala sur ipdi. Valem sur iprem nunc, lorsa sur iprium. Valum sur ipdi et, lorsus sur ipci. Valem sur iprem. Valem sur ipci. Lorsa sur iprium. Lorsem sur ipci, valus sur iprem. Lorsem sur iprem nunc, valus sur iprium.

Answer Preview

Only 50% of students answer this correctly