practice10-22 - Practice Questions Chapter 8 1 Given the...

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Practice Questions - Chapter 8 1. Given the risk of XYZ Corp. common stock, your required rate of return is 16%. Given the current economic conditions and the current market price of the stock, you determine that the stock's expected return for the upcoming year is 14%. Which of the following is true? a) The stock is overpriced. d) The stock price should rise. b) The stock is underpriced. e) Both B and D are correct. c) The stock is correctly priced. 2. Medical Supply Company has a beta of 1.55 and recently paid a common stock dividend of $3.47. If the return on Treasury securities is currently 7.5% and the return on the S&P 500 index is 12%, what is the required rate of return on the firm's common stock? 3. Dimensions Corporation's preferred stock recently paid its annual dividend of $6.75 per share. The par value of the preferred stock is $100. Investors require a 9% rate of return on this stock. What is the intrinsic value of the preferred stock?
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