Chapters $8$&$9-$ Assignments

You are considering buying a stock with a beta of $0\mathrm{.}73.$ If the risk$-$free rate of return is $6\mathrm{.}9$ percent, and the expected return for the market is $12\mathrm{.}2$ percent, what should the expected rate of return be for this stock? $($State your answer as a percentage.$)$

If the risk$-$free rate is $6\mathrm{.}9\%,$ the market risk premium is $7\mathrm{.}0\%,$ and the expected return on Security $J$ is $29\mathrm{.}4\%,$ what is the beta for Security J$?($Calculate your answer to two decimal places.$)$

Title: Preferred stock $($solve for value$)$

Timeless Corporation issued preferred stock with a par value of $$700.$ The stock promised to pay an annual dividend equal to $19\mathrm{.}0\%$ of the par value. If the appropriate discount rate for this stock is $10\mathrm{.}0\%,$ what is the value of the stock?

Title: Supernormal growth $($three years g$($s$))$

Growing, Inc. is a firm that is experiencing rapid growth. The firm yesterday paid a dividend of $$5\mathrm{.}60.$ You believe that dividends will grow at a rate of $24\mathrm{.}0\%$ per year for three years, and then at a rate of $10\mathrm{.}0\%$ per year thereafter. You expect that the stock will sell for $$177\mathrm{.}59$ in three years. You expect an annual rate of return of $18\mathrm{.}0\%$ on this investment. If you plan to hold the stock indefinitely, what is the most you would pay for the stock now?

Title: Constant Growth Model $($new div $-$ CAPM$)5.$ You are considering buying common stock in Grow On$,$ Inc. You have projected that the next dividend the company will pay will equal $$7\mathrm{.}60$ and that dividends will grow at a rate of $6\mathrm{.}0\%$ per year thereafter. The firm's beta is $0\mathrm{.}93,$ the risk$-$free rate is $6\mathrm{.}1\%,$ and the market return is $13\mathrm{.}6\%.$ What is the most you should pay for the stock now?