Question
You purchase 200 shares of stock for $80 a share. The stock pays a $3 per share dividend at year-end. What is your real (inflation-adjusted)
You purchase 200 shares of stock for $80 a share. The stock pays a $3 per share dividend at year-end. What is your real (inflation-adjusted) rate of return if the inflation rate is 6% and the year-end stock price is $50? Round the answer to two decimal places and report it as a percentage figure without the % symbol.
Top hedge fund manager Sally Buffit believes that a stock with the same market risk as the S&P 500 will sell at year-end at a price of $50. The stock will pay a dividend at year-end of $4.00. Assume that risk-free Treasury securities currently offer an interest rate of 3.0%. The historical average risk premium for the S & P 500 index is 6% per annum. What should be the price of the stock Sally should be willing to pay today?
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