The following information is available about the ABC stock:The current value of the stock is 38.The stock pays semi-annual dividends of 0.95 per share, with the next dividend tobe paid within 4 months.The continuous risk-free interest rate is 3%.Calculate the two-year forward price of ABC stock.a) 34.37b) 35.77c) 36.44d) 37.23e) 37.92

To calculate the two-year forward price of the ABC stock, we need to use the formula for the forward…

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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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Similar questions

A stock just paid a dividend of $1.69. The dividend is expected to grow at 23.51% for five years and then grow at 3.84% thereafter. The required return on the stock is 12.81%. What is the value of the stock? Answer format: Currency: Round to: 2 decimal places.
A share of stock with a beta of 1.20 now sells for 55. Investors expect the stock to pay a year-end dividend of 2.90. The T-bill rate is 7 percent, and the market risk premium is 8 percent. If the stock is perceived to be fairly priced today,What must be investors’ expectations of the price of the stock at the end of the year?
A stock has a price (i.e., present value of all cash flows from the stock expected by investors) of $33.00 today. It is expected to pay a dividend of $1.10 per share next year, $1.20 per share in the following year, $1.90 in the subsequent U years (i.e., pay a dividend of $1.90 in years 3 through year U+2 into the future), and then be sold for $36.00 in U+2 years (where that $34 represents the present value of all dividends expected after U+2 years). Compute the interest rate or expected return on this stock (i.e., iterate to find the r that sets the sum of the present value of the future expected cash flows equal to the $33 present value). U=44
The current price of a non-dividend-paying stock is $40. Over the next year it is expected to rise to $44 or fall to $36. An investor buys put options with a strike price of $41. What is the price of each option? The risk-free interest rate is 2% per annum (assume discrete compounding). a. $2.35 b. $1.76 c. $2.18 d. $1.96
A stock is expected to pay dividends of $1.38 per share in year 1 and $1.53 per share in year 2. After that, the dividend is expected to increase by 2.9% annually. What is the current value of the stock at a discount rate of 15.4% ?
A stock is expected to pay a dividend of $3.60 in the next year and thereafter it is expected to grow its dividends indefinitely at a constant annual growth rate of 3.6%. Using a required rate of return (or discount rate) of 9%, calculate the current fair value for this stock.
A preferred stock pays a constant divided of $4.66 per year. Assuming the required rate of return for investing in the stock is 6.8%, calculate the fair price for the stock.
YNA is expected to pay a dividend of $1.0 in Year 1 and $1.2 in Year 2. Analysts expect the price of YNA shares to be $19 two years from now. The risk-free rate of return is 4%, and the expected return on the market portfolio is 14%. The beta of the stock is 1.2. Compute the intrinsic value of the stock. Round your answer to two decimal places and enter without the dollar sign.
A stock just paid a dividend of $1.47. The dividend is expected to grow at 22.30% for five years and then grow at 4.19% thereafter. The required return on the stock is 14.06%. What is the value of the stock? Submit Answer format: Currency: Round to: 2 decimal places.
A stock pays a dividend of $0.60 the first year, $0.80 the second year, and $0.90 the third year. The dividend is then expected to grow at a constant rate of 7 %, forever. The discount rate is 16%. Currently, the stock selling for $10.00. Should the investors buy this stock?
A preferred stock promises to pay $3.76 in interests every year. The required rate of return is 7.32%. What's the fair price of this preferred stock?
Wheel Source stock has an expected annual return of 17.40 percent. The stock is expected to be priced at $70.26 per share in 1 year and the stock currently has an expected dividend yield of 4.75 percent. What is the current price of the stock? O $62.37 (plus or minus 10 cents) O $59.85 (plus or minus 10 cents) O $82.49 (plus or minus 10 cents) O $67.07 (plus or minus 10 cents) O none of the answers are within 10 cents of the correct answer

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