You have $ 100,000 in your hand and you want to invest it for two years. You
Question:
You have $ 100,000 in your hand and you want to invest it for two years. You have three options and your decision is based on maximum return from alternatives at the end of two years.
Option 1: You can purchase share: market value $11/share, Face value $10/share. The company is expected to declare 10% cash dividend and 5% stock dividend each year for the next two years.
Option 2: You can purchase share: market value $45/share, Face value $10/share. The company is expected to declare 15% cash dividend and 10% stock dividend each year for the next two years.
Option 3: You can deposit the cash into bank at an interest rate 6% each year for the next two years.
Calculate your return at the end of second years for each of the option and decide the best alternative for you. Show all calculation.
Personal Finance An Integrated Planning Approach
ISBN: 978-0136063032
8th edition
Authors: Ralph R Frasca