Question
A share is quoted at Rs. 60. An investor expects the
company to pay a dividend of Rs. 3 per share, one year from now. The expected price of share after one year is Rs. 78.50. If the beta of the share is 1.5, the risk free rate is 6% and the market risk premium is 10%, what would be the required rate of return?Solution
To calculate the required rate of return, we can use the Capital Asset Pricing Model (CAPM): Required Rate of Return (Cost of Equity) = Risk-Free Rate + Beta * Market Risk Premium Given values: Beta (Ξ²) = 1.5 Risk-Free Rate = 6% Market Risk Premium = 10% Required Rate of Return = 6% + 1.5 * 10% Required Rate of Return = 6% + 15% Required Rate of Return = 21% So, the required rate of return is 21%. The answer is b. 21%.
When the day on which a promissory note or bill of exchange is at maturity (after including days of grace) is a public holiday (except emergency or unfo...
Income Tax Act, 1961 came into force on _______.
As per RBI guidelines, a borrower or guarantor is classified as a Wilful Defaulter if the person has committed wilful default and the loan outstanding i...
Which of the following techniques was developed by Kaplan and Norton?
Currently, a firm sells 10,000 units at βΉ20 each. Variable cost is βΉ12 per unit and Fixed Costs are βΉ50,000. If the firm increases its selling pri...
ABC Ltd. reports a net profit after tax of βΉ6,00,000 for FY 2024β25. Depreciation expense is βΉ1,20,000. Accounts receivable increased by βΉ80,000...
5000 kgs of raw material were bought at Rs.2.5 per kg and 10% is normal waste. If recovery value of the normal waste is Rs.1.2 per kg, then find the cos...
What is the maximum deduction allowed under Section 80U of the Income Tax Act, 1961, for an individual with a severe disability?
The matching of revenue and related expenses gives which of the following?
Which of the following is a tool used by the Reserve Bank of India (RBI) for treasury management in banks?
Relevant for Exams:
