Consider a stock that is traded 4 times per year with an average spread of 1% and
Question:
Consider a stock that is traded 4 times per year with an average spread of 1% and paying annual dividends equal to $2, discounted at 3%.
a. Based on the 1% spread and annual turnover equal to 4, what is the value of the stock?
b. What would be your answer to part a if the spread were 0.5%?
c. What would be your answer to part b if the annual turnover were 2?
d. What is the expected return for the stock in part c?
e. What are the current bid/ask prices given the scenario in part c? Assume that the stock’s value is midway between the bid and ask prices and round to the nearest $0.001.
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
a The stock is valued as follows P 2 003 4 001 2857 b P 2 ...View the full answer
Answered By
Rinki Devi
Professional, Experienced, and Expert tutor who will provide speedy and to-the-point solutions.
Hi there! Are you looking for a committed, reliable, and enthusiastic tutor? Well, teaching and learning are more of a second nature to me, having been raised by parents who are both teachers. I have done plenty of studying and lots of learning on many exciting and challenging topics. All these experiences have influenced my decision to take on the teaching role in various capacities. As a tutor, I am looking forward to getting to understand your needs and helping you achieve your academic goals. I'm highly flexible and contactable. I am available to work on short notice since I only prefer to work with very small and select groups of students.
I have been teaching students for 5 years now in different subjects and it's truly been one of the most rewarding experiences of my life. I have also done one-to-one tutoring with 100+ students and helped them achieve great subject knowledge.
2+ Reviews
10+ Question Solved
Related Book For 
Question Posted:
