Risk Metrics Company Is Expected to Pay a Dividend of $3.50

question 119

Multiple Choice

Risk Metrics Company is expected to pay a dividend of $3.50 in the coming year.Dividends are expected to grow at a rate of 10% per year.The risk-free rate of return is 5% and the expected return on the market portfolio is 13%.The stock is trading in the market today at a price of $90.00. What is the approximate beta of Risk Metrics's stock

• A)0.8
• B)1.0
• C)1.1
• D)1.4
• E)None of the options

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Definitions:

Zero Coupon Issue

A bond or debt security that doesn’t pay periodic interest but is traded at a discount, realizing gains at maturity.

Annual Coupon

The yearly interest payment made by a bond issuer to its bondholders.

Market Rate

The prevailing interest rate available in the marketplace on investments or loans.

Sinking Funds

A fund formed by periodically setting aside money for the gradual repayment of a debt or replacement of a wasting asset over time.