Question

1. According to the basic stock valuation model, the value an investor assigns to a share of stock is dependent upon the length of time the investor plans to hold the stock. 2. True b. False Market risk refers to the tendency of a stock to move with the general stock market. A stock with above-average market risk will tend to be more volatile than an average stock, and its beta will be greater than 1.0. a. True b. False The last dividend on Spirex Corporation's common stock was $4.00, and the expected growth rate is 10 percent. If you require a rate of return of 20 percent, what is the highest price you should be willing to pay for this stock? 2. $44.00 b. $38.50 c. $40.00 d. $45.69 e. There is not enough information to answer this question.

Answer 1

1. True

The stock price depends on two things which are the required rate of return and other is time.

2. true

Beta indicates the probability of a stock to go along with the movement of the market portfolio, higher the beta, higher is the volatility.

3. Price = D(1+ growth)/ K- growth rate

= 4(1+0.10) / 0.20 - 0.10

= 44

a is the correct option