Is it possible to construct a portfolio of stocks that has an expected return equal to the riskfree
rate?
3 answers
Yes -- if the portfolio is large enough and consists of stocks with a history of being profitable with good management. A diversified portfolio will include stocks of various size and in various industries. Twenty well-chosen stocks will probably have a higher return rate than riskfree investments.
Ambler, Inc. will pay $4.00 per share dividend next year. The company pledges to increases its dividend by 4% per year indefinitely. If you require a 12% return on you investment, how much will you pay for the company's stock today?
Suppose Bulldog, Inc. just paid a dividend of $2.00 per share. The company expects to increase its dividend by 2% per year indefinitely. If the market requires a return of 10% on assets of this risk, how much the stock should be selling for?
4 answers