Question

Using the following closing prices and dividends compute the CWI (cumulative wealth index), the CPC (cumulative price change) and the CDY (cumulative dividend yield). Assume an initial investment of $1. Indicate your answer clearly. You must show your work to receive credit. A share of stock has an intrinsic value of $20 based on the dividend discount model and using the CAPM. The firm just paid a dividend of $2, the dividend growth rate is 5%, the risk free rate is 4% and the market risk premium is 8%. What is the stock's beta?

Answer 1

To calculate the Cumulative Wealth Index (CWI), Cumulative Price Change (CPC), and Cumulative Dividend Yield (CDY), we need the closing prices and dividends. However, I can help you understand how to calculate the stock's beta.

Step-by-step explanation:

To calculate the Cumulative Wealth Index (CWI), Cumulative Price Change (CPC), and Cumulative Dividend Yield (CDY), we need the closing prices and dividends. Unfortunately, those details are not provided in the question. However, I can help you understand how to calculate the stock's beta.

Beta measures the sensitivity of a stock's returns to the overall market returns. It indicates how much the stock's price moves relative to the market. The formula to calculate beta is:

Beta = (Expected Return of the Stock - Risk-Free Rate) / Market Risk Premium