Question
Vigdis owns investment A and 1 share of stock B. The total value of his holdings is $1,820. Investment A is expected to pay annual
Vigdis owns investment A and 1 share of stock B. The total value of his holdings is $1,820. Investment A is expected to pay annual cash flows to Vigdis of $320 per year with the first annual cash flow expected later today and the last annual cash flow expected in 7 years from today. Investment A has an expected return of 13.86 percent. Stock B is expected to pay its next annual dividend in 1 year. Stock Bs next dividend is expected to be $7.19 per share and the stock is expected to be priced at $128.77 in 1 year. What is the expected return for stock B? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098.
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