1.If a stock is purchased for $100 per share and held one year, during which tim

Question

1.If a stock is purchased for $100 per share and held one year, during which time a quarterly dividend of $1.5 is paid, each quarter, and the price climbs to $130 per share. What is the rate of return?

2.What should be the price for a common stock paying $1.35 annually in dividends if the dividend will remain constant (zero growth of dividend), indefinitely, and the expected return is 5.5%?

3.If the dividend yield for year one is expected to be 4% based on the current price of $80, what will year seven dividend (DIV7) be if dividends grow at a constant 2%?

4.What dividend per share would be reported in the financial press for a stock that currently has 4.5% dividend yield and the most recent stock price was $75?

5.What would be the stock price today if you know you will sell the stock in 2 years from today at $55/share and you expect annual dividends $2/share in year 1 and $3/share in year 2, given the discount rate is 10%?

Explanation / Answer

Please hit LIKE button if this helped. For any further explanation, please put your query in comment, will get back to you. Question 1 Dividend 1.5*4 6 Capital Appreciation 130-100 30 Net Return 36 Rate of Return 36/100 36% Question 2 Price of common stock 1.35/5.5%         24.55 Question 3 80 4% Dividend for Year 1 80*4% 3.2 Present Value 2% 0.8880 3.2/0.8880 3.60 Alternate Way: 3.2*(1.02)^7-1 Dividend Growth 80 4% 3.20 3.26 3.2*102% 3.33 3.26*102% 3.40 3.40*102% 3.46 3.46*102% 3.53 3.53*102% 3.60 3.60*102% Question 4 Dividend Per share 75*4.5% 3.375 Question 5 Year Dividen/Sale PV 10% Total 1 2 0.9091 1.82 2 3 0.8264 2.48 2 100 0.8264 82.64 Stock Price today 86.94

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