Author Question: An application of the capital asset pricing model, called the security market line, is more ... (Read 145 times)

yoooooman · **on:** Jul 10, 2018

An application of the capital asset pricing model, called the security market line, is more inclusive than the dividend growth model for pricing stocks and provides expected returns for companies based on their risk,

the premium for taking on risk, and the reward for waiting and not on their historical pattern of dividends.
Indicate whether the statement is true or false.

Question 2

What is the required return from Truman Planned Community stock if its beta is 1.1, the return on the market portfolio is 12, the risk free rate is 3, next year's dividend will be 1.25 per share and dividends are expected to grow 5 per year?

A) 17.86 per share
B) 62.50 per share
C) 53.00 per share
D) 5.2
E) 12.9