You are considering buying some share in The Wayne Coporation as part of your retirement account. First, you want to calculate the expected return for Wayne Corp's stock to see if it meets your very high standards. You have estimateed the 3 for Wayne Corp to be 2.38, the risk free rate in the market to be 2 %, and the expected return on the market to be 20. What is the expected return for Wayne Corp? (Answer in Percentage terms and Round to 2 decimals)
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- By investing in a particular stock, a person can make a profit in one year of $3900 with probability 0.4 or take a loss of $800 with probability 0.6. What is this person's expected gain?Suppose you are thinking of purchasing the SunStar’s common stock today. If you expect SunStar to pay $0.80 dividend at the end of year one and $1.6 dividend at the end of year two and you believe that you can sell the stock for $15 at that time. If you required return on this investment is 10%, how much will you be willing to pay for the stock? a. $13.95 b. $14.44 c. 14.19 d. $15.51You are considering whether to purchase a company's stock. The stock is expected to pay two dividends, $1.50 at the end of year 1 and $1.75 at the end of year 2. The expected selling price of the stock is $17.50 at the end of year 2. If you require a rate of return of 16% per year for the investment, what is the maximum price that you are willing to pay per share? Select one: a. $14.61 b. $15.49 C. $14.51 d. $15.60 e. $14.17
- You consider buying a share of stock at a price of $950. The stock is expected to pay a dividend of $10 next year, and your advisory service tells you that you can expect to sell the stock in 1 year only for $945. What is the expected rate of return?Suppose you bought XYZ stock 1 year ago for $6.54 per share and sell it at $2.79. You also pay a commission of $0.35 per share on your sale. What is the total return on your investment? The total return is %?3. 4. 7. A stockbroker calls you and suggests that you invest in the Lauren Computer Company. After analyzing the firm's annual report and other material, you believe that the distribu- tion of expected rates of return is as follows: LAUREN COMPUTER CO. Possible Rate of Return -0.60 -0.30 -0.10 0.20 0.40 0.80 Probability 0.05 0.20 0.10 0.30 0.20 0.15 Compute the expected return [E(R;)] on Lauren Computer stock. What reforms to the financial system might reduce its exposure to systemic risk?
- d) You got an offer to by a share. The price is 20p and the market is expected to grow by 5% in a year until you sell the share after having received 1p in dividend. Your required rate of return is 12%. Will you accept the offer? Make proper calculations and give an explanation for your decision.You are given the following payoff table showing the possible annual returns of three securities for the year 2019 under different economic conditions. You considering just a single-security investment. Higher Growth Likely Growth Lower Growth Savings Account 6 6 4 Bond 9 12 15 Stock 32 21 -5 Probability 0.20 0.60 ? Required: Explain the meaning of 32 and 12 in the payoff table. Which security would you consider for investment based on the expected return? Which security would you consider for investment based on risk? Advise on the optimum rational decision and explain why?Suppose you buy OMR2000 worth of stock on margin. The initial margin is 60% and the maintenance margin is 30%. a. How much have you borrowed? What is your equity? b. Suppose the value of the stock rises by 15% to OMR2300. What is the return on your investment? c. Suppose the value of the stock falls by 15% to OMR1700. What is the return on your investment? d. Does buying a stock on margin increase or decrease your risk of investment? Use the results in parts b and c to answer the question.
- You purchase a stock for $50 per share today. It will pay a dividend of $1.75 next month. If you can sell it for $65 right after the dividend is paid, what is the dividend yield? What is the capital gain? What is the rate of return?(Computing rates of return) From the following price data, compute the annual rates of return for Asman and Salinas. Time 1 2 3 12 4 14 (Click on the icon in order to copy its contents into a spreadsheet.) How would you interpret the meaning of the annual rates of return? Asman $9 11 Salinas $30 27 32 36 The rate of return you would have earned on Asman stock from time 1 to time 2 is %. (Round to two decimal places.)Go to finance.yahoo.com, search for the stock page for Merck (MRK). Find MRK's current trading price, Forward Dividend (Annual) in dollar, and its 1-year target estimate. Calculate the stock price if you required rate of return is 10% per year. This would be your intrinsic value (The fair price for Merck if the required rate of return is 10%). - Compare it to the current stock price from the website, would you buy the stock? - If you buy the stock today at the price you find on Yahoo, what would be your rate of return over the next year?