Answer:
The maximum that should be paid for this stock today is $9.83
Explanation:
The price of a stock whose dividends are expected to grow at a constant rate forever can be calculated using the constant growth model of DDM. The model bases the price of a stock on the present value of the expected future dividends. The formula for price today under this model is,
Price = D1 / r - g
Where,
- D1 is the dividends expected for the next period or D0 * (1+g)
- r is the required rate of return
- g is the growth rate in dividends
Price = 1.23 * (1+0.031) / (0.16 - 0.031)
Price = $9.83
They generally take in more in premiums than they pay out.
Answer:
$4,713
Explanation:
The formula and computation of the present value are shown below:
= Future value ÷ (1 + rate)^number of years
= $38,000 ÷ (1 + 0.11)^20
= $4,713
This (1 + rate)^number of years is also known as the discount factor which helps to calculate the amount of the present value
We simply apply the above formula so that the accurate value can come
Answer:
APR =5.263%
Explanation:
Computation of the true annual percentage rate
Using the APR formula to find the true annual percentage rate
APR=(2 × n × I) / [P × (N + 1)]
Hence;
APR= (2 × 1 × $100) / [$1,900 × (1 + 1)]
APR=$200/($1,900×2)
APR=$200/$3,800
APR= 0.05263 ×100
APR =5.263%
Therefore the true annual percentage rate using the APR formula will be 5.263%