Answer:
The amount I can afford to spend each year is $133,241.15
Explanation:
The amount I can afford to spend each year can be determined using the formula for present value of annuity due which is given below:
PV(Annuity due)=A*(1-(1+r)^-N)/r
PV is the present value of the investment which is $1.5 million
A is the annual spending which is unknown
r is the rate of return on the investment at 8% per year
N is the duration of investment which is 30 years
The formula can be rewritten as
A=PV/(1-(1+r)^-N)/r
(1-(1+r)^-N)/r=1-(1+8%)^-30/8%
=1-(1+0.08)^-30/0.08
=(1-0.099377333
)/0.08
=11.25778334
11.25778334 is known as annuity factor
A=$1500000/11.25778334
A=$133,241.15
Answer:
3.44 percent
Explanation:
Required return = Dividend yield + growth rate
Dividend yield = Required return - growth rate
= 11.65% - 8.21%
= 3.44%
Therefore, The dividend yield is 3.44%
