Q5-2 MEGG Inc. just paid a dividend of $2.00 per share on its stock. The dividends are expected to grow at a constant 6 percent per year indefinitely. If investors require a 13 percent return on the stock, what is the current price? What will the price be in 3 years? In 15 years?

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
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Q5-2
MEGG Inc. just paid a dividend of $2.00 per share on its stock. The dividends are expected to grow at a constant 6 percent per year indefinitely. If investors
require a 13 percent return on the stock, what is the current price? What will the price be in 3 years? In 15 years?
Q5-3
BrainSoft has 12% coupon bonds on the market with 9 years to maturity. The bonds make semiannual payments and currently sell for 110% of par. What is
the current yield on the bonds? The yield to maturity? The effective annual yield?
affect the coupon rate of the hond issue. You are Michello's assistant and she has asked you ton paro a momo to Brott describing the offect of o
following hand features on t
of the bond Sho also
LL
1r
Transcribed Image Text:Q5-2 MEGG Inc. just paid a dividend of $2.00 per share on its stock. The dividends are expected to grow at a constant 6 percent per year indefinitely. If investors require a 13 percent return on the stock, what is the current price? What will the price be in 3 years? In 15 years? Q5-3 BrainSoft has 12% coupon bonds on the market with 9 years to maturity. The bonds make semiannual payments and currently sell for 110% of par. What is the current yield on the bonds? The yield to maturity? The effective annual yield? affect the coupon rate of the hond issue. You are Michello's assistant and she has asked you ton paro a momo to Brott describing the offect of o following hand features on t of the bond Sho also LL 1r
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Since there are multiple questions, we will answer only first question. 

Dividend is the amount of profit being distributable to the shareholders. Dividend growth rate is the rate at which dividend grows every year. 

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