Read Only - You can't save changes to this file. Question 310 marks) What does the CAPM allow you to calculate? Does it imply that a stock with a beta of zero will offer a zero expected rate of return? Why? (Smarks) Madison was recruited to design and decorate the offices of a large pharmaceutical company. While there, she accidentally read a report indicating that a new drug had just been approved by the Therapeutic Goods Administration. She immediately bought some of the company's shares which doubled in price over the following week This outcome is inconsistent with which form of market efficiency and why? (5 marks) Click or tap here to a Question 4 What would be the expected price of a stock when dividends are expected to grow at a 25% rate for three years, then grow a constant rate of 5. if the stock's required return 136 and next year's dividend will be 54.007 (5 marks) II The ordinary shares of FED I.imated are selling for $26.75 on the open market. A dividend of $3.68 is expected to be distributed, and the growth rate of this company is estimated to be 5.5%. If Bob Dean, an average investor, is considering purchasing this share at the market price, what is his expected rate of return (3 marks) What rate of return is expected from a stock that sells for $30 per share pays $1.50 annually in dividends, and is expected to sell for $38 per share in one year? (2 marks) Read Only - You can't save changes to this file. Question 310 marks) What does the CAPM allow you to calculate? Does it imply that a stock with a beta of zero will offer a zero expected rate of return? Why? (Smarks) Madison was recruited to design and decorate the offices of a large pharmaceutical company. While there, she accidentally read a report indicating that a new drug had just been approved by the Therapeutic Goods Administration. She immediately bought some of the company's shares which doubled in price over the following week This outcome is inconsistent with which form of market efficiency and why? (5 marks) Click or tap here to a Question 4 What would be the expected price of a stock when dividends are expected to grow at a 25% rate for three years, then grow a constant rate of 5. if the stock's required return 136 and next year's dividend will be 54.007 (5 marks) II The ordinary shares of FED I.imated are selling for $26.75 on the open market. A dividend of $3.68 is expected to be distributed, and the growth rate of this company is estimated to be 5.5%. If Bob Dean, an average investor, is considering purchasing this share at the market price, what is his expected rate of return (3 marks) What rate of return is expected from a stock that sells for $30 per share pays $1.50 annually in dividends, and is expected to sell for $38 per share in one year? (2 marks)