n ordinary share pays dividend every year at a constant growth rate of g p.a. forever. The share has just paid a dividend of $3. Jacky buys the share today for $40 at a rate of return of 12% p.a. for the next 12 months.

Which of the following can be used to calculate the return on income for Jacky if he plans to sell the share in 12 months immediately after he receives the dividend (only one correct answer)? (2 marks)

3/40

3*1.12/40

3*(1+g)/40+g

None of the options give the correct answer.

3*(1+g)/40

3*(1+g)/40+0.12

Calculate the annual growth rate g for this share. (Round your answer to a percentage of 2 decimals without the % symbol. E.g. if you answer is 0.12345, you should input 12.35.) (2 marks)

3/40

3*1.12/40

3*(1+g)/40+g

None of the options give the correct answer.

3*(1+g)/40

3*(1+g)/40+0.12

Calculate the annual growth rate g for this share. (Round your answer to a percentage of 2 decimals without the % symbol. E.g. if you answer is 0.12345, you should input 12.35.) (2 marks)

Answer