Question
Chaz owns investment A and 1 share of stock B. The total value of his holdings is $365. Stock B is expected to pay an
Chaz owns investment A and 1 share of stock B. The total value of his holdings is $365. Stock B is expected to pay an annual dividend of $13.47 each year forever, the stocks expected return is 11.24 percent per year, and its next dividend is expected in 1 year. Investment A has an expected return of R and is expected to pay $61.55 per year for a finite number of years such that its first annual payment is expected later today and its last annual payment is expected in 5 years from today. What is R, the expected return for investment A? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098.
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