The required return on the market portfolio is 12 percent. The beta ofstock X is...
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The required return on the market portfolio is 12 percent. The beta ofstock X is 2.0. The required return on the stock is 18 percent. The expected dividend growth on stock X is 5 percent. The price per share of stock X is Rs.30. What is the expected dividend per share of stock X next year? What will be the combined effect of the following on the price per share of stock X?
(a) The inflation premium increases by 2 percent.
(b) The decrease in the degree of risk-aversion reduces the differential between the return on market portfolio and the risk-free return by one-third.
(c) The expected growth rate of dividend on stock X decrease to 4 percent.
(d) The beta of stock X falls tol.8.
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