# financial management

Is it possible to construct a portfolio of stocks that has an expected return equal to the riskfree
rate?

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1. Yes -- if the portfolio is large enough and consists of stocks with a history of being profitable with good management. A diversified portfolio will include stocks of various size and in various industries. Twenty well-chosen stocks will probably have a higher return rate than riskfree investments.

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Ms. Sue
2. Ambler, Inc. will pay \$4.00 per share dividend next year. The company pledges to increases its dividend by 4% per year indefinitely. If you require a 12% return on you investment, how much will you pay for the company's stock today?

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3. Suppose Bulldog, Inc. just paid a dividend of \$2.00 per share. The company expects to increase its dividend by 2% per year indefinitely. If the market requires a return of 10% on assets of this risk, how much the stock should be selling for?

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