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# Assignment Print View 1. 11/8/12 1:54 PM award: 10.00 points Four years ago, Bling Diamond, Inc., paid a dividend of \$1.26 per share. Bling paid a

11/8/12 1:54 PM Assignment Print View Page 1 of 2 http://ezto.mhecloud.mcgraw-hill.com/hm.tpx 1. award: 10.00 points 2. award: 10.00 points 3. award: 10.00 points Four years ago, Bling Diamond, Inc., paid a dividend of \$1.26 per share. Bling paid a dividend of \$1.88 per share yesterday. Dividends will grow over the next five years at the same rate they grew over the last four years. Thereafter, dividends will grow at 12 percent per year. Required: What will Bling Diamond’s cash dividend be in seven years? (Do not include the dollar sign (\$). Round your answer to 2 decimal places. (e.g., 32.16)) Bling Diamond’s cash dividend \$ Worksheet Difficulty: Intermediate Universal Laser, Inc., just paid a dividend of \$3 on its stock. The growth rate in dividends is expected to be a constant 6 percent per year indefinitely. Investors require a 17 percent return on the stock for the first 3 years, a 12 percent return for the next 3 years, and an 9 percent return thereafter. Required: What is the current share price for the stock? (Do not include the dollar sign (\$). Round your answer to 2 decimal places. (e.g., 32.16)) Current share price \$ Worksheet Difficulty: Intermediate Consider the following information: State of Return on Return on Economy Stock A Stock B Bear .073 -.074 Normal .088 .136 Bull .052 .214 Required: (a) Calculate the expected return and standard deviation of each of the above stocks. Assume each state of the economy is equally likely to happen. (Do not include the percent signs (%). Round your answers to 2 decimal places. (e.g., 32.16)) Stock A Stock B Expected return % % Standard deviation % % (b) What is the covariance between the returns of the two stocks? (Negative amount should be indicated by a minus sign. Round your answer to 6 decimal places. (e.g., 32.161616)) Covariance (c) What is the correlation between the returns of the two stocks? (Negative amount should be indicated by a minus sign. Round your answer to 4 decimal places. (e.g., 32.1616)) Correlation Worksheet Difficulty: Intermediate
11/8/12 1:54 PM Assignment Print View Page 2 of 2 http://ezto.mhecloud.mcgraw-hill.com/hm.tpx 4. award: 10.00 points A stock has an expected return of 13.75 percent, its beta is 1.25, and the expected return on the market is 12 percent. Required: What must the risk-free rate be? (Do not include the percent sign (%). Round your answer to 2 decimal places. (e.g., 32.16)) Risk-free rate % Worksheet Difficulty: Basic

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Solution 1:Dividend paid 4 years ago = \$1.26 per share
Dividend paid yesterday = \$1.88 per share
Computation of Bling Diamond's cash dividend at the end of 7th year:Existing growth rate:let the...

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