Author Question: Universal Export's Preferred shares will pay their first dividend in five years. The dividend will ... (Read 185 times)

xclash · **on:** Jul 10, 2018

Universal Export's Preferred shares will pay their first dividend in five years. The dividend will be 6.5 on a 50-par value. Assume that the dividends will continue annually in perpetuity at that level.

The required return of preferred shareholders is 9. What is the fair price for the preferred shares?
A) 23.47
B) 25.58
C) 36.11
D) 49.04
E) 50.00

Question 2

Suppose you invest 1,000 today, compounded quarterly, with the annual interest rate of 5.00. What is your investment worth in one year?

A) 1,025.00
B) 1,500.95
C) 1,025.27
D) 1,050.95

lcapri7 · **Reply #1 on:** Jul 10, 2018

Answer to Question 1

wohoo thank youuu.

Answer to Question 2

Answer: D
Explanation: D) With PV = 1,000, APR = 5.00, C/Y = 4, periodic interest rate = r = 0.0125, we begin by taking (1 + periodic rate) to the power of C/Y. Doing this gives: (1.0125)4 = 1.050945. Multiplying this number by PV gives 1,050.95.