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i safari File Edit View History Bookmarks Window Help 13%)D Tue 5 Dec 6:53:05 PM e ezto.mheducation.com Ver Game of Thrones: The L 4 DIFFERENTIAL IMPACT Chapter 8 Homeworlk 7.69 points Shares in Brothers Grimm, Inc., manufacturers of gingerbread houses, are expected to pay a dividend of $5.00 in one year and to sell for $100 per share at that time. How much should you be willing to pay today per share of Grimm under the following situations? Instructions: Enter all responses rounded to two decimal places a. If the safe rate of interest is 5 percent and you believe that investing in Grimm carries no risk. The share value today would be $ 4331 b If the safe rate of interest is 10 percent and you believe that investing in Grimm carries no risk. aper The share value today would be $ c. If the safe rate of interest is 5 percent, but your risk premium is 1 percent. litz The share value today would be S Assume that Grimm is not expected to pay a dividend, but the expected price is unchanged. Instructions: Enter all respoises rounded to two decimal places. d. If the safe rate of interest is 5 percent and you believe that investing in Grimm caries no risk. The share value today would be$ tz e. If the safe rate of interest is 10 percent and you believe that investing in Grimm carries no risk. The share value today would be $ t. If the safe rate of interest is 5 percent, but your risk premium is 1 percent. The share value today would be SExplanation / Answer
a The share value today would be $ 100.00 (5+100)/(1+5%) b The share value today would be $ 95.45 (5+100)/(1+10%) c The share value today would be $ 99.06 (5+100)/(1+6%) d The share value today would be $ 95.24 100/(1+5%) e The share value today would be $ 90.91 100/(1+10%) f The share value today would be $ 94.34 100/(1+6%)
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