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Question
Todd Mountain Development Corporation is expected to pay a dividend of $2.50 in the upcoming year. Dividends are expected to grow at the rate of 8% per year. The risk-free rate of return is 5%, and the expected return on the market portfolio is 12%. The stock of Todd Mountain Development Corporation has a beta of .75. Using the CAPM, the return you should require on the stock is _________.
A. 7.25%
B. 10.25%
C. 14.75%
D. 21%
Answer
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Related questions
Q:
Which of the following does not approximate the performance of a buy-and-hold portfolio strategy?
A. An equally weighted index
B. A price-weighted index
C. A value-weighted index
D. All of these options (Weights are not a factor in this situation.)
Q:
Under a "passive core" portfolio management strategy, a manager would ___________.
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Q:
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B. maintaining approximately the same proportions of a portfolio in each asset class over time
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Q:
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B. $37,500
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Q:
The asset universe is the _____________________.
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Q:
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Q:
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Q:
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Q:
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Q:
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Q:
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Q:
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Q:
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Q:
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Q:
A typical hedge fund incentive bonus is usually equal to ________ of investment profits beyond a predetermined benchmark index.
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Q:
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Q:
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Q:
You manage a $15 million hedge fund portfolio with beta = 1.2 and alpha = 2% per quarter. Assume the risk-free rate is 2% per quarter and the current value of the S&P 500 Index is 1,200. You want to exploit the positive alpha, but you are afraid that the stock market may fall and you want to hedge your portfolio by selling 3-month S&P 500 future contracts. The S&P contract multiplier is $250.
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D. The answer cannot be determined from the information given.