1. You are making forecasts for two securities that prof both securities, calculate the cash flow you can expect at the end of year 7 (that is, seven years from now). a. Security A will pay $10 next year (year 1), and the cash flows will grow at a rate of 2% per year thereafter. b. Security B paid $9 last night, and the cash flows are expected to grow at a rate of 2.5% per year. 2. Assume that the appropriate discount rate for both perpetuities described in Question 1 is 9%. Calculate the present value of the expected future payments from each of these securities
1. You are making forecasts for two securities that prof both securities, calculate the cash flow you can expect at the end of year 7 (that is, seven years from now). a. Security A will pay $10 next year (year 1), and the cash flows will grow at a rate of 2% per year thereafter. b. Security B paid $9 last night, and the cash flows are expected to grow at a rate of 2.5% per year. 2. Assume that the appropriate discount rate for both perpetuities described in Question 1 is 9%. Calculate the present value of the expected future payments from each of these securities
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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answer question number 2 with step by step solving and explain how should I make an excel spreadsheet for this question with image or picture or chart with final answer
Transcribed Image Text:1. You are making forecasts for two securities that promise perpetual, growing annual cash flows. For
both securities, calculate the cash flow you can expect at the end of year 7 (that is, seven years from
now).
a. Security A will pay $10 next year (year 1), and the cash flows will grow at a rate of 2% per year
thereafter.
b. Security B paid $9 last night, and the cash flows are expected to grow at a rate of 2.5% per year.
2. Assume that the appropriate discount rate for both perpetuities described in Question 1 is 9%.
Calculate the present value of the expected future payments from each of these securities.
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