Question
Portfolio managers are frequently paid a proportion of the funds under management. Suppose you manage a $108 million equity portfolio offering a dividend yield (DIV
Portfolio managers are frequently paid a proportion of the funds under management. Suppose you manage a $108 million equity portfolio offering a dividend yield (DIV1/P0) of 5.8%. Dividends and portfolio value are expected to grow at a constant rate. Your annual fee for managing this portfolio is .58% of portfolio value and is calculated at the end of each year.
a.Assuming that you will continue to manage the portfolio from now to eternity, what is the present value of the management contract?(Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)
Present value______$milllion
b.What would the contract value be if you invested in stocks with a 4.8% yield?(Do not round intermediate calculations. Enter your answer in millions rounded to 2 decimal places.)
Contract value_______$milllion
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started