At the beginning of the month, you owned $6,200 of Company G, $8,400 of Company
ID: 1176098 • Letter: A
Question
At the beginning of the month, you owned $6,200 of Company G, $8,400 of Company S, and $1,800 of Company N. The monthly returns for Company G, Company S, and Company N were 7.65 percent, -1.54 percent, and -.19 percent. What is your portfolio return?
Hastings Entertainment has a beta of 0.72. If the market return is expected to be 17.40 percent and the risk-free rate is 6.40 percent, what is Hastings’ required return? (Round your answer to 2 decimal places.)
If a preferred stock from Pfizer Inc. (PFE) pays $14.00 in annual dividends, and the required return on the preferred stock is 8.00 percent, what's the value of the stock?
Explanation / Answer
1.Total investment=(6200+8400+1800)=$16400
Portfolio return=Respective return*Respective investment weights
=(6200/16400*7.65)+(8400/16400*-1.54)+(1800/16400*-0.19)
=2.08%(Approx).
2.
Required return=Risk free rate+Beta*(MArket rate-Risk free rate)
=6.4+0.72*(17.4-6.4)
=14.32%
3.Value of stock=Annual dividend/required return
=(14/0.08)
=175.
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