information on its beta coefficient, which is equal to 2. The risk free rate is currently 2% and the return on the Samp;P 500 index (which you use…

information on its beta coefficient, which is equal to 2. The risk free rate is currently 2% and the return on the S&P 500 index (which you use as a proxy for the market portfolio) is 15%. You estimate that Microsoft’s dividends are expected to grow at 5% per year. 

a.         What is the return on equity for Microsoft?

b.        If the standard deviation of returns on Microsoft is 40% per annum and the standard deviation of the S&P 500 is 20%, what is the correlation coefficient between returns on Microsoft and returns on S&P 500 index?

c.         What price should you pay for this stock, if it just paid $2 per share dividend?

please do not use excel functions

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