Your rich aunt (who really liked you) passes away at the age of 93. Fortunately for you, she leaves you an investment in preferred stock that will pay a $7,000 annual dividend forever, with the first dividend payment occurring one year from today. Since you don't want to wait for your money, you decide to sell the investment. If the annual interest rate is 5.2%. What is the value today of this investment? a. $134, 615.38. b. $70, 000.00. c. $7, 000.00. d. The value of this investment cannot be calculated with the information provided.
Your rich aunt (who really liked you) passes away at the age of 93. Fortunately for you, she leaves you an investment in preferred stock that will pay a $7,000 annual dividend forever, with the first dividend payment occurring one year from today. Since you don't want to wait for your money, you decide to sell the investment. If the annual interest rate is 5.2%. What is the value today of this investment? a. $134, 615.38. b. $70, 000.00. c. $7, 000.00. d. The value of this investment cannot be calculated with the information provided.
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:Your rich aunt (who really liked you) passes
away at the age of 93. Fortunately for you, she
leaves you an investment in preferred stock
that will pay a $7,000 annual dividend forever,
with the first dividend payment occurring one
year from today. Since you don't want to wait
for your money, you decide to sell the
investment. If the annual interest rate is 5.2%.
What is the value today of this investment?
a. $134, 615.38.
b. $70, 000.00.
c. $7, 000.00.
d. The value of this investment cannot be
calculated with the information provided.
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