Question 1.

The Delphia company just paid a $1.50 annual dividend, the dividend increase by 2.8% annually, and you require a 14% rate of return.

• a. How much are you willing to pay for one share of Delphia stock?
• b. How much are you willing to pay for one share if the required rate is 20%?

Question 2.

Suppose that you have purchased a share of stock for $25 the most recent dividend was $2 and dividends are expected to grow at the rate of 5% indefinitely.

• a. What must your required return be on the stock based on the dividend growth model?
• b. What is the dividend yield
• c. what is the expected capital gain yield

Question 3.

The Jackson company offers a 6% coupon bond with semiannual payments and a yield to maturity of 7.27%. What is the market price of $1,000 face value bound?

Question 4.

you earn a 12% nominal return. If the inflation rate is 4% What is your real rate of return?

Question 5.

What is the future value of your investment in 10 years if you contribute $1000 per year for the next 10 years? Assume interest is 5.625