« previous next »

Author Question: Discraft Inc is expected to pay an annual dividend of 1 at the end of the current year. (Discraft ... (Read 20 times)

dbose

  • Hero Member
  • *****
  • Posts: 597
on: Jul 10, 2018
Discraft Inc is expected to pay an annual dividend of 1 at the end of the current year. (Discraft pays its dividends annually.) The dividend is expected to grow quickly over the ensuing year at the rate of 20.
 
  Starting two years from today the growth rate of dividends will fall to a rate of 3 and continue at that rate in perpetuity. Investors require a 12 return on the stock. Estimate the market price of the shares of Discraft in one year's time (at Year 1 ) just after the next dividend is paid.
  A) 11.24
  B) 11.62
  C) 12.80
  D) 13.33
  E) 14.82

Question 2

You invest 15,000 today, compounded monthly, with an annual interest rate of 8.25. What amount of interest will you earn in one year?
 
  A) 1,285.38
  B) 1,295.38
  C) 1,298.98
  D) 1,723.23


jazzlynnnnn

  • Sr. Member
  • ****
  • Posts: 335
Reply #1 on: Jul 10, 2018
Answer to Question 1

D

Answer to Question 2

Answer: A
Explanation: A) With PV = 15,000, APR = 8.25, C/Y = 12, periodic interest rate = r = 0.006875, we begin by taking (1 + periodic rate) to the power of C/Y. Doing this gives: (1.006865)12 = 1.085692. Multiplying this number by PV gives 16,285.38. Thus, the interest earned is:
16,285.38 - 15,000 = 1,285.38.


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
« previous next »
 

Did you know?

In ancient Rome, many of the richer people in the population had lead-induced gout. The reason for this is unclear. Lead poisoning has also been linked to madness.

Did you know?

The U.S. Pharmacopeia Medication Errors Reporting Program states that approximately 50% of all medication errors involve insulin.

Did you know?

Many of the drugs used by neuroscientists are derived from toxic plants and venomous animals (such as snakes, spiders, snails, and puffer fish).

Did you know?

Signs and symptoms that may signify an eye tumor include general blurred vision, bulging eye(s), double vision, a sensation of a foreign body in the eye(s), iris defects, limited ability to move the eyelid(s), limited ability to move the eye(s), pain or discomfort in or around the eyes or eyelids, red or pink eyes, white or cloud spots on the eye(s), colored spots on the eyelid(s), swelling around the eyes, swollen eyelid(s), and general vision loss.

Did you know?

People with alcoholism are at a much greater risk of malnutrition than are other people and usually exhibit low levels of most vitamins (especially folic acid). This is because alcohol often takes the place of 50% of their daily intake of calories, with little nutritional value contained in it.

The phosphorus cycle. Numbers are 1012 g P or fluxes as 1012 g P per year (data from Schlesinger 199 The phosphorus cycle. Numbers are 1012 g P or fluxes as 1012 g P per year (data from Schlesinger 199
Astronomers identified 12-billion-year-old white dwarf stars only 100 light years away from Earth Astronomers identified 12-billion-year-old white dwarf stars only 100 light years away from Earth
20,000 year old spotted hyena painting from the Chauvet Cave, France 20,000 year old spotted hyena painting from the Chauvet Cave, France
Expected Benefits for ICD-10-CM Expected Benefits for ICD-10-CM
If the pump is not running, check the wiring and current flow before going through the process of ... If the pump is not running, check the wiring and current flow before going through the process of ...
Distribution of Thunderstorms: Approximately 14.5 million thunderstorms occur each year across the ... Distribution of Thunderstorms: Approximately 14.5 million thunderstorms occur each year across the ...
Video: Reflex arc construction

For a complete list of videos, visit our video library