Compute the price of share of stock

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Stock and bond pricing. Group work in class – Post Answers on BS

1. A stock sells for $2000, pays $30 in dividends and grows at 2% annually.

a. What is the interest rate?

b. If the Risk free rate is 2%, what is the risk premium?

2. Compute the price of a share of stock that pays a dividend of $2 per year, assuming that you will sell it for $30 after two years and you require 12% return.

3. A stock paid $4 dividends last year, the dividends grow by 10% annually. What would you be willing to pay for it today, assuming that you will hold it forever and you require 15% return?

4. If a stock $pays 20 in dividends that grow at 2.5% annually and the interest rate is 4.5%, what would you be willing to pay for the stock? Is that your maximum or minimum?

5. You expect a stock to sell for $100 after two years and pay $20 in dividends each year. What would you pay for it today if the interest rate is 4%?

6. Compute the price of a share of stock that pays a dividend of $2 per year, assuming that you will sell it for $30 after two years and you require 12% return.

7. A stock paid $4 dividends last year, the dividends grow by 10% annually. What would you be willing to pay for it today? assuming that you will hold it forever, Interest rate is12%

Reference no: EM131842369

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