« previous next »

Author Question: Discraft Inc is expected to pay an annual dividend of 1 at the end of the current year. (Discraft ... (Read 68 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?

According to the American College of Allergy, Asthma & Immunology, more than 50 million Americans have some kind of food allergy. Food allergies affect between 4 and 6% of children, and 4% of adults, according to the CDC. The most common food allergies include shellfish, peanuts, walnuts, fish, eggs, milk, and soy.

Did you know?

In women, pharmacodynamic differences include increased sensitivity to (and increased effectiveness of) beta-blockers, opioids, selective serotonin reuptake inhibitors, and typical antipsychotics.

Did you know?

Studies show that systolic blood pressure can be significantly lowered by taking statins. In fact, the higher the patient's baseline blood pressure, the greater the effect of statins on his or her blood pressure.

Did you know?

An identified risk factor for osteoporosis is the intake of excessive amounts of vitamin A. Dietary intake of approximately double the recommended daily amount of vitamin A, by women, has been shown to reduce bone mineral density and increase the chances for hip fractures compared with women who consumed the recommended daily amount (or less) of vitamin A.

Did you know?

Patients who cannot swallow may receive nutrition via a parenteral route—usually, a catheter is inserted through the chest into a large vein going into the heart.

The Black Death spread over much of Europe in a three-year period in the middle of the fourteenth ce The Black Death spread over much of Europe in a three-year period in the middle of the fourteenth ce
A 100-Year Flood Map of Montpelier, Vermont A 100-Year Flood Map of Montpelier, Vermont
A mini clamp-on digital multimeter can be used to measure alternator output and unwanted AC current ... A mini clamp-on digital multimeter can be used to measure alternator output and unwanted AC current ...
Explain how it can be desirable from an intertemporal perspective for a country run a current ... Explain how it can be desirable from an intertemporal perspective for a country run a current ...
A non-interest-bearing five-year note for $54600.00 issued May 1, 2015, is discounted April 1, ... A non-interest-bearing five-year note for $54600.00 issued May 1, 2015, is discounted April 1, ...
Video: What is Cholesterols? Introduction to Lipoproteins

For a complete list of videos, visit our video library