If D₁ = $1

question 58

Multiple Choice

If D₁ = $1.25, g (which is constant) = 5.5%, and P₀ = $44, what is the stock's expected total return for the coming year?

• A) 7.54%
• B) 7.73%
• C) 7.93%
• D) 8.13%
• E) 8.34%

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Definitions:

Single-Index Model

A simplified way to model the returns of a security or portfolio with respect to the returns of the overall market, using only the market index as the explanatory variable.

Systematic Risk

The risk inherent to the entire market or market segment, also known as non-diversifiable risk or market risk.

Market Index

A statistical measure that tracks the performance of a basket of specific stocks, representing a portion of the overall market to reflect trends or market health.

Index Model

Index Model is a statistical model used in finance to describe the relationship between the returns on an investment and the returns on a market index.