The Company is expected to announce their annual dividend tomorrow. One year ago they paid a dividend of $2.30 , and 4 years ago they paid $1.85 .You believe that future dividends will grow by the same rate as past ones. The required rate of return on the stock is 11.44%.

1.

What is the expected growth rate of the company?

a.3.33%b. 7.53%c.9.54%d.10.56%e.12.93%

2.

How much is your offer price?

a.$46.25b.$51.97c.$68.02d.$71.41e.$86.72

3.

Due to market conditions, you must purchase the stock for $8.00 above your offer price.At this higher purchase price, what is your expected total rate of return?

a.10.30%b.11.03%c.12.45%d.13.46%e.15.66%

This set up pertains to the following three questions

A bond matures in 8 years and pays an 8.4 percent annual coupon.The bond has a face value of $1,000 and currently sells for $972.

4. What is the bond's current yield and yield to maturity?

a.Current yield = 7.74%; yield to maturity = 6.67%

b.Current yield = 8.64%; yield to maturity = 8.25%

c.Current yield = 8.64%; yield to maturity = 8.90%

d.Current yield = 8.96%; yield to maturity = 7.38%

e.Current yield = 7.64%; yield to maturity = 8.90%

5. Suppose that you hold the bond for two years and when you sell it the yield-to-maturity has decreased by 70 basis points.What would have been yourannualrate of return for the bond investment?

 

Answer rating: 100% (QA)

1 Expected Growth Rate of the Company To calculate the expected growth rate of the company based on the past dividends we can use the Dividend Growth ... View the full answer