A Ltd. paid a dividend of 5for the last year. The dividend is expected to grow at 25% for the next 6 years and at 10% per annum thereafter. The…

CA Final · Advanced Financial Management · MTP · May 2026
A Ltd. paid a dividend of 5for the last year. The dividend is expected to grow at 25% for the next 6 years and at 10% per annum thereafter. The standard deviation of market return and A Ltd.'s share is 12% and 18% respectively. The correlation between market return and A Ltd. share return is 0.3733. The return of government bond is 13% per annum and market return is expected to be around 20%. From the information given above, choose the correct answer to the following questions:
(A) 0.42
(B) 0.56
(C) 0.67
(D) 0.84

Suggested Answer and Working Notes:

Correct Answer: Option (B)

0.56

Topics: Portfolio Management, Security Valuation

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