HW#2.pdf - ECON3347 FALL 2019 Homework 2 Answer KEY 1 Bet'R Bilt Bikes just announced that its annual dividend for this coming year will be \$2.42 a

# HW#2.pdf - ECON3347 FALL 2019 Homework 2 Answer KEY 1 Bet'R...

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ECON3347 FALL 2019 Homework 2 Answer KEY 1. Bet'R Bilt Bikes just announced that its annual dividend for this coming year will be \$2.42 a share and that all future dividends are expected to increase by 2.5% annually. What is the market rate of return if this stock is currently selling for \$22 a share? 2. Can't Hold Me Back, Inc. is preparing to pay its first dividends. It is going to pay \$1.00, \$2.50, and \$5.00 a share over the next three years, respectively. After that, the company has stated that the annual dividend will be \$1.25 per share indefinitely. What is this stock worth to you per share if you demand a 7% rate of return? 3. In the early 1980s, the Treasury yield curve had a severe downward slope with short-term yields near 20% and long-term yields below 15%. Explain how such a pattern might occur. It is true that long-term rates should be higher than short-term rates due to maturity

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• Spring '16
• Islam Rizvanoghlu

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