A stock that sells for $100 entitles you to a dividend payment of $4 today. You estimate

Question:

A stock that sells for $100 entitles you to a dividend payment of $4 today. You estimate that the growth rate of the fi rm’s dividends is about 2 percent per year, and that the risk-free rate is 3½ percent. What is the risk premium suggested by the price of this stock? Does it strike you as high or low? How would your answer change if the stock price were $150 instead of $100?

Fantastic news! We've Found the answer you've been seeking!

Step by Step Answer:

Related Book For  book-img-for-question

Money Banking And Financial Markets

ISBN: 9780073375908

3rd Edition

Authors: Stephen Cecchetti, Kermit Schoenholtz

Question Posted: