Consider a 5 year equity linked note that pays one share of XYZ at maturity The price of XYZ today is $100, and XYZ is expected to pay its annual dividend of $1 at the end of this year, increasing by $0 50 each year The fifth dividend will be paid the day before the note matures The appropriate dis...

Let R e 006 The present value of the dividends is R 1 150 R 2 ...

Consider a 5-year equity-linked note that pays one share of XYZ at maturity. The price of XYZ

Question:

Consider a 5-year equity-linked note that pays one share of XYZ at maturity. The price of XYZ today is $100, and XYZ is expected to pay its annual of $1 at the end of this year, increasing by $0.50 each year. The fifth will be paid the day before the note matures. The appropriate for dividends is a continuously compounded risk-free rate of 6%.
Suppose that the day after the note is issued, XYZ announces a permanent increase of $0.25. What happens to the price of the equity-linked note?

Discount Rate
Depending upon the context, the discount rate has two different definitions and usages. First, the discount rate refers to the interest rate charged to the commercial banks and other financial institutions for the loans they take from the Federal... Dividend
A dividend is a distribution of a portion of company’s earnings, decided and managed by the company’s board of directors, and paid to the shareholders. Dividends are given on the shares. It is a token reward paid to the shareholders for their...