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Author Question: The effective annual rate for a continuously compounded 6.0 APR is about 6.184. Indicate whether ... (Read 34 times)

moongchi

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on: Jul 10, 2018
The effective annual rate for a continuously compounded 6.0 APR is about 6.184.
 
  Indicate whether the statement is true or false.

Question 2

Natalie is interested in valuing the shares of Union Aerospace (UA). UA pays dividends annually. She expects the stock to pay dividends of 3 at the end of each of the next four years.
 
  Thereafter, she expects the dividend to grow at 7 per annum in perpetuity. If her required return is 12, then how much should she pay for a share?
  A) 43.63
  B) 45.54
  C) 47.24
  D) 49.91
  E) 73.31


TheDev123

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Reply #1 on: Jul 10, 2018
Answer to Question 1

Answer: TRUE
Explanation: EAR = e0.06 - 1 = 0.0618365 or 6.184

Answer to Question 2

D


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moongchi

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Reply #2 on: Jul 10, 2018
Thank you :)


TheDev123

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Reply #3 on: Jul 10, 2018
Happy to help you


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