A Stock Selling for $20

question 57

Multiple Choice

A stock selling for $20.00 today and expected to have an income (dividend) yield of 3% and a capital gain yield of 5% in one year will increase in price to sell at:

• A) $21.60
• B) $20.60
• C) $21.00
• D) $20.40

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Definitions:

Market Portfolio

A theoretical portfolio that includes all assets available in the market, with each asset weighted by its market capitalization.

Beta

A benchmark for evaluating the volatility or systematic risk of a security or portfolio vis-à-vis the wider market.

Risk-Free Rate

The theoretical rate of return of an investment with zero risk, often represented by the yield on government securities.

Market Portfolio

A theoretical bundle of investments that includes all types of assets available in the market, with each asset weighted by its market capitalization.