A prestigious investment bank designed a new security that pays a quarterly dividend of $1.75 in perpetuity.

Question:

A prestigious investment bank designed a new security that pays a quarterly dividend of $1.75 in perpetuity. The first dividend occurs one quarter from today. What is the price of the security if the annual percentage rate is 5.5 percent compounded quarterly?

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...