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Problem set 678

# Problem set 678 - C 298 Practice Problem Set#6(2010 W...

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C298 Practice Problem Set #6 (2010 W) Solutions will be posted on March 4, 2011 1. Suppose you bought one share of Pouce Coupe Resorts (PCR) one year ago for \$9. Today, you received a dividend payment of \$1 and sold the share for \$9.50. What was your realized return on PCR over the last year? 2. Suppose you bought a share of Apple Computer one year ago for \$51. This morning you received a dividend of \$0.48 and sold the share for \$59. What was your realized return? 3. This morning, the Bank of Dawson Creek (BDC) paid a \$2 dividend (it pays dividends once per year) and these are expected to grow at the constant rate of 5% per year. If the required return on BDC is 15%, calculate the current stock price of BDC. 4. Yesterday, the Hudson Hope Computer (HHC) announced a \$3 dividend to be paid in one year's time. If the current price of HHC is \$30 and the required return on HHC is 20%, what is the (constant) growth rate consistent with the current stock price? 5. One year ago, you purchased a newly issued, 20 year Government of Canada bond that was issued at its par value of \$1,000. The coupon rate on this bond is 7% per year and the coupons are paid annually (you received the first coupon this morning). Today, the bond is priced to yield 8% and you have just sold it. What was your return over the past year? 6. Dilbert Conglomerated has just gone public. Over the first year, dividends are expected to grow 18%. The next two years after that, dividend growth will be 12%. Finally, dividend growth will settle into a rate of growth of 10% from then on. Assume the company just paid a dividend of \$1.00.

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Problem set 678 - C 298 Practice Problem Set#6(2010 W...

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