Part 1: Consider the Gordon model of constant growthrate assumption. State briefly what this model says about the valueof stocks. In 2018, Walmart paid $2.08 in dividends per share. Thestock traded for about $96 per share towards the end of the year.Find out a set of inputs to the Gordon growth model (e.g., theassumed growth rate g and the required rate of returnr, that make the intrinsic value of the stock equal to thetrading price of $96. There can be many combinations; you just needto find out one such combination by trial and error.
Part 2: Suppose you have 10,000 to invest and you canchoose up to five companies' stocks (or fewer) to split thisinvestment. Which companies would you choose so that you create awell-diversified portfolio (usually diversification requires moretypes of investments, but this is a simpler example)? Review theconcept of diversification and the role of correlation in Chapter8. Defend your choice based on chapter 8.
