Question
1. Suppose a stock is expected to pay a $2.60 dividend every year in perpetuity and the required return is 9.5% with annual compounding. What
1. Suppose a stock is expected to pay a $2.60 dividend every year in perpetuity and the required return is 9.5% with annual compounding. What is the price of this stock?
$25.87
$27.37
$19.50
$24.83
2. Suppose a stock is expected to pay a $0.50 dividend every year for the next 1,000 years. The required return is 10% with annual compounding. What is the price of this stock?
$5
$5.50
$0.05
$15.00
3. Suppose a stock is expected to pay a $0.95 dividend monthly (in perpetuity) and the required rate of return is 13% (annual) with monthly compounding. What is the price of the stock?
$8.26
$7.31
$87.69
$27.27
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