CHE374F-PS03 Sol-2009 - CHE374F PS #3 Solutions 2009...

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CHE374F – PS #3 Solutions – 2009 Question #1: Interest rate = 7% a) ݔൌ Present worth = 77.86 b) ݔൌ Future worth = 125.0227 c) ݔൌ 77.86 * ሺ1 ൅ .07ሻ = 102.0558 d) 77 .86 = ሺଵା.଴଻ሻ ଶ௫ ሺଵା.଴଻ሻ ݔൌ 33.8599 Interest rate = 10% a) ݔൌ Present worth = 26.32 b) ݔൌ Future worth = 51.2829 c) ݔൌ 26.32* ሺ1 ൅ .1ሻ = 38.5296 d) 26.32 = ሺଵା.ଵሻ ଶ௫ ሺଵା.ଵሻ ݔൌ 12.72368 Question #2: Current stock price 11.2 Beta 0.6 Market rate 0.07 Risk free rate 0.02 CAPM: R ൌ2%൅.6ሺ7% െ 2%ሻ ൌ .05 Expected price 6 years from now = 11.2 * ሺ1 ൅ .05ሻ = 15.0091 Question #3: Risk free rate 0.04 Market rate 0.09 EXP Div at the end of the year 5 Div growth rate 0% Beta 1.3
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CAPM: R ൌ 4%൅1 .3ሺ9% െ 4%ሻ ൌ .105 Fair Price ൌ ܦ݅ݒ ሺ1 ൅ ܥܣܲܯሻ ܦ݅ݒ ሺ1 ൅ ܥܣܲܯሻ ܦ݅ݒ ሺ1 ൅ ܥܣܲܯሻ
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CHE374F-PS03 Sol-2009 - CHE374F PS #3 Solutions 2009...

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