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Unformatted text preview: return on the bond in problem 3? (9.63%) 5. Suppose risk free rate is 6% and the risk premium on the market is estimated to be 6.5%. Given that you estimate ABCs beta to be 1.4, what is the required rate of return on ABCs common stock? (15.1%) 6. The year end prices and the dividends paid by stocks A and B are shown below Year: 2001 2002 2003 2004 2005 2006 Year end stock prices: Stock A 30.50 27.52 29.58 35.78 44.42 39.78 Stock B 43.32 38.65 36.42 48.35 61.54 54.17 Dividend paid during year: Stock A-.52 .54 .56 .58 .61 Stock B-.60 .60 .70 .70 .70 a. Calculate the annual return for both stocks A and B for each year from 2002-2006 b. Calculate the annual return on an equally weighted portfolio of stocks A and B for each year. c. Calculate the arithmetic mean annual return(AMR) and the geometric mean annual return (GMR) for the five year period for both stocks. d. Calculate the standard deviation of the annual returns for each stock....
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- Fall '08