Finance

Finance
:
http://au.finance.yahoo.com/
http://au.finance.yahoo.com/q?s=%5EAXJO
Please provide brief answers for each of the following. (You don’t have to write
much for each question)
a. Imagine AGL Energy Limited had a beta of 1.5. What does this say about the
company’s shares?
b. Government bonds (issued by a Monetarily Sovereign Government) yield a 3%
return and the expected return to the market was the return of the ASX 200
from January 2013 till January 2014. Using the CAPM model calculate the
required rate of return for AGL shares over this period?
Hint: refer to the following website:
http://au.finance.yahoo.com/q?s=%5EAXJO.
Use the closing monthly historical share price on 2 Jan 2014 and 2 Jan 2013 to
calculate the expected return for ASX 200.
c. Why would the required return calculated in b) not compensate you for taking
on unsystematic risk?
d. If AGL just paid a dividend of $0.60 and dividends are expected to grow at a
constant rate of 2% forever, what is the current share price?
e. What are the limitations of your estimated share price?
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