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Consider the following stocks, all of which will pay a liquidating dividend in a year and nothing in the interim:

Market Capitalization ($ million) Expected Liquidating Dividend ($ million) Beta

Stock A 800 1000 0.77

Stock B 750 1000 1.46

Stock C 950 1000 1.25

Stock D 900 1000 1.07

a. find out the expected return of each stock.

b. What is the sign of correlation between the expected return and market capitalization of the stocks?

Basic Finance, Finance

  • Category:- Basic Finance
  • Reference No.:- M939188

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