00:01
Hello students, we are given a question here that there is a dividend of $4 .2 which is expected to pay in the upcoming year.
00:08
Growth rate is given as 8 % per year.
00:11
Risk -free rate of return is 4%.
00:14
Expected return on the market portfolio is 14%.
00:18
Okay.
00:18
The stock is trading in the market today at $84 then calculate the beta of the stock.
00:25
Okay, students? so we are supposed to know that first of all, we need to determine the market.
00:30
Market capitalization rate it means mc r will be equal to d1 divided by p not plus g okay students where d1 is nothing but the dividend next year so mc r can be written as dividend paid next year is four point two dollar so we can put here that it is 4 .20 divided by what is p not p not is the current stock price okay students which is given as here 84 dollar so we can put we can put here that it is 84 plus g what is g it is the growth rate which is given as 8 percentage it means 0 .08 so mcr comes out as equals to see how we will solve it we will have to make us a little bit calculation here that the 4 .2 divided by 84 so it should be like 0 .05 plus 0 .08 so we will get here marginal capitalization rate is 0 .08 so we will get here marginal capitalization rate is point one three okay now as we are supposed to know that here according to the ddm it the mcr is nothing but equal to 13 percentage so according to the capm model we can write here according to c a p .m.
01:50
Students capm model mcr have to be equal to rf plus beta times of a e times of rm, sorry, erm minus rf.
02:06
Okay, students.
02:07
So here, we can just say that rf is the risk -free rate of.
02:11
Okay? so basically we can say that here...