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Required Textbook(s) and Additional Materials
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Check My Assignment!Investment Management 9781260203202 Fundamentals of Investments Jordan, Bradford D./ Miller, Thomas W. Jr./ Dolvin, Steven D. 8th / McGraw-Hill Required / New
Chapter 6 Problems 9, 11, 12, & 13 (p. 215)
Chapter 7 Problem 1 (pps. 251-252)
Chapter 8 Problem 1 (p. 289)
These are problem questions from the 7th edition Textbook, if you have the 8th edition Textbook, please use it instead
Chapter 6 Problems
9. Perpetual Dividend Growth (LO1, CFA6) Star Light & Power increases its dividend
3.8 percent per year every year. This utility is valued using a discount rate of 9 percent, and the
stock currently sells for $38 per share. If you buy a share of stock today and hold on to it for at
least three years, what do you expect the value of your dividend check to be three years from
today?
11. Sustainable Growth (LO4, CFA6) Joker stock has a sustainable growth rate of 8 percent,
ROE of 14 percent, and dividends per share of $1.65. If the P/E ratio is 19, what is the value of a
share of stock?
12. Capital Asset Pricing Model (LO1, CFA2) A certain stock has a beta of 1.3. If the risk-free
rate of return is 3.2 percent and the market risk premium is 7.5 percent, what is the expected return
of the stock? What is the expected return of a stock with a beta of .75?
13. Residual Income Model (LO3, CFA9) Bill’s Bakery expects earnings per share of $2.56
next year. Current book value is $4.70 per share. The appropriate discount rate for Bill’s
Bakery is 11 percent. Calculate the share price for Bill’s Bakery if earnings grow at 3 percent
forever.
Chapter 7 Problems
1.Cumulative Abnormal Returns (LO2, CFA2) On November 14, Thorogood Enterprises
announced that the public and acrimonious battle with its current CEO had been resolved. Under
the terms of the deal, the CEO would step down from his position immediately. In exchange, he
was given a generous severance package. Given the information below, calculate the cumulative
abnormal return (CAR) around this announcement. Assume the company has an expected return
equal to the market return. Graph and interpret your results. Do your results support market
efficiency?
Date
Market
Return (%)
Company
Return (%)
Nov 7 0.5 0.4
Nov 8 0.3 0.4
Nov 9 20.2 20.3
Nov 10 20.6 20.5
Nov 11 1.3 1.1
Nov 14 20.1 1.8
Nov 15 0.1 0.1
Nov 16 0.9 0.7
Nov 17 0.2 0.3
Nov 18 20.2 0.0
Nov 19 0.3 0.2
Ch. 8
1.Advance/Decline Lines (LO4, CFA1) Use the data below to construct the advance/decline
line for the stock market. Volume figures are in thousands of shares and are from November 2–6,
2009.
Stocks
Advancing
Advancing
Volume
Stocks
Declining
Declining
Vol ume
Monday 1,634 825,503 1,402 684,997
Tuesday 1,876 928,360 1,171 440,665
Wednesday 1,640 623,369 1,410 719,592
Thursday 2,495 1,101,332 537 173,003
Friday 1,532 508,790 1,459 498,585RequiredTextbook(s)and Additional MaterialsInvestment Management9781260203202Fundamentals of InvestmentsJordan, Bradford D./ Miller, Thomas W. Jr./Dolvin, Steven D.8th / McGraw-HillRequired / NewChapter 6 Problems 9, 11, 12, & 13 (p. 215)Chapter 7 Problem 1 (pps. 251-252)Chapter 8 Problem 1 (p. 289)Theseareproblem questions from the 7theditionTextbook, if you have the 8theditionTextbook,please use it insteadChapter 6 Problems9.Perpetual Dividend Growth (LO1, CFA6)Star Light & Power increases its dividend3.8 percent per year every year. This utility is valued using a discount rate of 9 percent, and thestock currently sells for $38 per share. If you buy a share of stock today and holdon to it for atleast three years, what do you expect the value of your dividend check to be three years fromtoday?11.Sustainable Growth (LO4, CFA6)Joker stock has a sustainable growth rate of 8 percent,ROE of 14 percent, and dividends per share of $1.65. If the P/E ratio is 19, what is the value of ashare of stock?12.Capital Asset Pricing Model (LO1, CFA2)A certain stock has a beta of 1.3. If the risk-freerate of return is 3.2 percent and the market risk premium is 7.5 percent, what is the expectedreturnof the stock? What is the expected return of a stock with a beta of .75?Required Textbook(s) and Additional MaterialsInvestment Management9781260203202Fundamentals of InvestmentsJordan, Bradford D./ Miller, Thomas W. Jr./ Dolvin, Steven D.8th / McGraw-HillRequired / NewChapter 6 Problems 9, 11, 12, & 13 (p. 215)Chapter 7 Problem 1 (pps. 251-252)Chapter 8 Problem 1 (p. 289)These are problem questions from the 7thedition Textbook, if you have the 8theditionTextbook, please use it insteadChapter 6 Problems9. Perpetual Dividend Growth (LO1, CFA6) Star Light & Power increases its dividend3.8 percent per year every year. This utility is valued using a discount rate of 9 percent, and thestock currently sells for $38 per share. If you buy a share of stock today and hold on to it for atleast three years, what do you expect the value of your dividend check to be three years fromtoday?11. Sustainable Growth (LO4, CFA6) Joker stock has a sustainable growth rate of 8 percent,ROE of 14 percent, and dividends per share of $1.65. If the P/E ratio is 19, what is the value of ashare of stock?12. Capital Asset Pricing Model (LO1, CFA2) A certain stock has a beta of 1.3. If the risk-freerate of return is 3.2 percent and the market risk premium is 7.5 percent, what is the expectedreturnof the stock? What is the expected return of a stock with a beta of .75?
