Intro

The preferred stock of General Motors pays a dividend of $$2$ every quarter. The appropriate discount rate is $4\%$ per quarter.

Part $1$

Attempt $\frac{1}{5}$ for $10$ pts$.$

What is the present value of all dividends?

Correct $$

Since this is a perpetuity $($constant payment forever$),$ the present value is

$PV=\frac{PMT}{r}=\frac{2}{0\mathrm{.}04}=50$

Part $2$

Attempt $\frac{5}{5}$ for $8$ pts$.$

If you expect to receive the $$2$ every quarter for exactly $7$ years and nothing thereafter, what is the present value of those cash flows?