A common stock offers dividend of $2 next period and its price is $30 next period. Suppose that the covariance of this s

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answerhappygod
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A common stock offers dividend of $2 next period and its price is $30 next period. Suppose that the covariance of this s

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A common stock offers dividend of $2 next period and its
price is $30 next period. Suppose that the covariance of this stock
and market is 24, market average return is 18% and market standard
deviation is 4%, and the risk-free interest rate is 5%. What is
proper discount rate for this stock? What is the value of this
stock today?
Now assume that investors will hold this stock into the
indefinite future. The growth rate of dividends is 8%.
Stockholders’ desired discount rate is 15%. What is the implied
fair price of this stock?
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