Stock ABC is currently sold at a price RM4.50 per unit. The dividend of 7 cent per share was recently been paid and the dividends are expected to rise at 3% per annum. The rates of inflation is expected to be 2.15% per annum. (a) Compute the real rate of return by using the sum of geometric progression.
Stock ABC is currently sold at a price RM4.50 per unit. The dividend of 7 cent per share was recently been paid and the dividends are expected to rise at 3% per annum. The rates of inflation is expected to be 2.15% per annum. (a) Compute the real rate of return by using the sum of geometric progression.
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
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Transcribed Image Text:QUESTION 3
Stock ABC is currently sold at a price RM4.50 per unit. The dividend of 7 cent per share was
recently been paid and the dividends are expected to rise at 3% per annum. The rates of inflation
is expected to be 2.15% per annum.
(a)
Compute the real rate of return by using the sum of geometric progression.
(b)
Validate your answer in (a) by using the relation between the real rate of return, current
dividend, real growth rate of dividends and the share price.
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