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2. Mr. GOOD buys Company BAD's stock. At to, the price of the stock is $100 per share. At ti, Company BAD pays $20 dividends,
2. Mr. GOOD buys Company BAD's stock. At to, the price of the stock is $100 per share. At ti, Company BAD pays $20 dividends, and the price of Company BAD's stock decreases to $90. (a) What is the rate of return? Does Mr. GOOD get a capital gain or a capital loss? What is the dividend yield? (b) If the spot rate of return is 10%, what is the present value of this stock investment? (c) Suppose Company BAD pays S20 dividends at t1, and the stock can be sold only at t2. What price at t2 can guarantee Mr. GOOD a non-negative net present value
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