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How do I calculate Equity Valuation-Gordon growth Model on TI-BA II Plus calculator.

  1. A company just paid a dividend of 2.30 to its shareholder. It estimates that future growth will be at 2%. What is the value of the stock if you are looking for an 8% return on your investment? Answer is 39.10 but do not know how to get it.
  2. You are interested in buying a preferred stock and want to know what the rate of return is. The stock is selling for $85.00 and pays a dividend today of $2.25. What is the rate of return? Answer is 0.265

CAPM-Expected rate of return in different economic states:

  1. What is the expected rate of return for a stock where there is a 60% chance of recession and 40% chance of an expansion? The stock would return 2% during the recession and 8% in an expansionary period. Answer is 0.44 but do not know how to calculate it.

Capital Asset pricing model:

  1. A stock has a beta of 2.1, a market premium of 0.14 where the market rate is 0.17. What is the expected rate of return? Answer is 0.1113. How do I calculate these questions?
  2. A stock has an expected return of 0.16. The market premium is 0.11 and the federal funds are returning 0.025. What is the beta? Answer is 1.2273

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