Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

help with questions please The current price of SPY (as of writing) is $380.50. Over the past 12 months, SPY has paid $6.2 in dividends

help with questions please image text in transcribed
image text in transcribed
The current price of SPY (as of writing) is $380.50. Over the past 12 months, SPY has paid $6.2 in dividends per share. What is the trailing tweive month dividend yield for SPY? Express your answer as a percent. In recent history, dividends have grown about 6% per year for SPY. Using the Gordon Growth Model, and assuming this dividend growth rate continues, what is the discount rate implied by the current price? Express your answer in percent. Question 3 100pts The risk free rate (yield on US Treasuries) is now approximately 4%. Using the CAPM, what is the implied market risk premium in the discount rate you just found? Express your answer in percent. Question 4 100pts Firms may return cash to their shareholders by dividend payments or by stock buybacks (share repurchases). Recently, stock buybacks have grown to be much larger than dividend payments. Therefore, the dividend payments alone (the $6.2 over the last twelve months reported above) may not accurately represent the true yield investors receive by owning the asset. Assume that total payout is actually twice the dividend amount and that total payout also grows at 6% per year, what is the implied market risk premium given the current market price? Express your answer in percent

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Supply Chain Finance Solutions

Authors: Erik Hofmann, Oliver Belin

1st Edition

3642175651, 978-3642175657

More Books

Students also viewed these Finance questions

Question

7. Understand the challenges of multilingualism.

Answered: 1 week ago

Question

5. Give examples of variations in contextual rules.

Answered: 1 week ago