Stock A and Stock B's stock prices and dividends, along with the Dhaka Stock Exchange (DSE)...

 

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Stock A and Stock B's stock prices and dividends, along with the Dhaka Stock Exchange (DSE) Index, are shown here for the period 2017-2022. The DSE Index data are adjusted to include dividends. Data, as given in the problem, are shown below: Year 2022 2021 2020 2019 2018 2017 STOCK A Stock Price Dividend 34.350 1.600 42.650 2.500 41.500 1.540 40.450 1.750 39.475 2.766 36.725 1.600 STOCK B Stock Price 59.950 60.500 61.950 62.200 59.700 57.950 Dividend 1.500 2.500 1.550 2.650 2.300 3.600 MARKET INDEX Includes Divs. 6,307.95 8,584.70 7,192.98 6,244.03 7,524.28 8,447.00 Question: The risk-free rate on long-term Treasury bonds is 6.79%. Assume that the market risk premium is 5%. What is the expected return on the market? Now use the SML equation to calculate the two companies' required returns. Stock A and Stock B's stock prices and dividends, along with the Dhaka Stock Exchange (DSE) Index, are shown here for the period 2017-2022. The DSE Index data are adjusted to include dividends. Data, as given in the problem, are shown below: Year 2022 2021 2020 2019 2018 2017 STOCK A Stock Price Dividend 34.350 1.600 42.650 2.500 41.500 1.540 40.450 1.750 39.475 2.766 36.725 1.600 STOCK B Stock Price 59.950 60.500 61.950 62.200 59.700 57.950 Dividend 1.500 2.500 1.550 2.650 2.300 3.600 MARKET INDEX Includes Divs. 6,307.95 8,584.70 7,192.98 6,244.03 7,524.28 8,447.00 Question: The risk-free rate on long-term Treasury bonds is 6.79%. Assume that the market risk premium is 5%. What is the expected return on the market? Now use the SML equation to calculate the two companies' required returns.

Answer rating: 100% (QA)

Solution To calculate the expected return on the market we can use the Capital Asset Pricin... View the full answer