MA373 F11 Chapter 7 Homework

MA373 F11 Chapter 7 - 10 yield rate 5 A preferred stock will pay a dividend of 100 today Dividends are paid annually The stock also provides that

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Chapter 7 1. A preferred stock pays a dividend of 50 every six months. Calculate the price of the preferred stock assuming the next dividend is payable in six months using a yield rate of 5% convertible semi-annually. 2. Number 1 from Section 7.1 in the Book. 3. A preferred stock pays a dividend of 200 at the end of each quarter. The stock was purchased for 10,000. Calculate the annual effective yield on the preferred stock if the next dividend is payable in 3 months. 4. A company’s common stock paid a dividend of $2 yesterday. The next dividend will be paid in one year and dividends are paid annually. If the dividend is expected to increase at 5% per year forever, calculate the value of the stock at a
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Unformatted text preview: 10% yield rate. 5. A preferred stock will pay a dividend of 100 today. Dividends are paid annually. The stock also provides that future dividends will increase at the rate of inflation. The stock is purchased to yield 8% and assuming an inflation rate of 3%. Calculate the price of the stock today (before payment of the dividend). 6. A company’s earnings for the year just ended were $5 per share. They expect their earnings to increase at 10% per year. Once their earnings exceed $10 per share, they will payout 75% as a dividend. Dividends are paid annually at the end of the year. Calculate the value of the stock to yield 15%. Answers 1. 2000 2. See book 3. 8.24% 4. 42 5. 2160 6. 60.44...
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This note was uploaded on 02/26/2012 for the course MA 373 taught by Professor Staff during the Fall '08 term at Purdue University-West Lafayette.

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