Ica2s - annual rate of interest is i = 10 200 ¬ 1-¬Ī 1 r 1 i ¬≤ 10 i-r = 200 ¬ 1 1 03 1 10 10 10 03 = 1376 75 2 A stock is selling for $21 per

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Name (Last, First): Math 210 Instructor: Ryan Hubscher Theory of Interest Spring, 2008 In Class Assignment # 2 (max. points = 4) Tuesday February 19, 2008 This assignment is open note/open book, and you may work together in groups of no more then 4. However, each student must hand in his/her own answer sheet. No credit will be given without supporting work. 1. Find the Present Value of a 10 year annuity immediate where the first payment is 200 and each subsequent payment is 3% larger then the preceding payment. The effective
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Unformatted text preview: annual rate of interest is i = 10%. 200 ¬∑ 1-¬Ī 1+ r 1+ i ¬≤ 10 i-r = 200 ¬∑ 1-( 1 . 03 1 . 10 ) 10 . 10-. 03 = 1376 . 75 2. A stock is selling for $21 per share. The stock pays a dividend at the end of each year, and the Ô¨Ārst dividend, x , will be paid one year from now. Each year, the dividend is expected to grow at a rate of r = 5% per year. If The yield rate on the stock is i = 15%. Evaluate x using the dividend discount model. Price = D 1 i-r 21 = x . 15-. 05 x = 2 . 1 1...
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This note was uploaded on 04/08/2008 for the course MATH 210 taught by Professor Hubscher during the Spring '08 term at University of Illinois at Urbana‚ÄďChampaign.

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