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Irina-Kira [14]
3 years ago
13

An investor is considering investing in a stock they plan to hold for 2 years. The stock is expected to pay dividends of $1.50 p

er share in each of the 2 years and sell for $20 at the end of two years. If the investor requires an 8% return on this stock, how much should they pay for it using the Dividend Discount Model?
Business
1 answer:
xz_007 [3.2K]3 years ago
3 0

Answer: $19.82

Explanation:

The price the investor would be willing to pay today would be the present value of the dividends and the selling price at the end of 2 years using the required return as the discount rate.

= 1.50 / (1 + 8%)  + 1.50 / (1 + 8%)²   + 20 / (1 + 8%)²

= 1.3888889 + 1.286 + 17.1467764

= $19.82

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tia_tia [17]

Answer:

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Explanation:

The meaning of a "collar" is that a put is bought at a strike price that is less than the price of the underlying instrument (this implies that a floor has been put on the price of the instrument); and that a call is disposed at a strike price which is higher than the price of the underlying instrument (this indicates that a ceiling above which the instrument will be called away has been created).

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Priya Rahavy, M.D., is a general practitioner whose offices are located in the Lake Forest Professional Building. In the past, D
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a. Conduct a relevant cost analysis to determine if it is profitable to outsource the bookkeeping.
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yulyashka [42]

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almond37 [142]

Answer:

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