What is the real rate of return on this investment

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1. You recently purchased an investment that yields 8% per year. The current inflation rate is 3% per year. What is the real rate of return on this investment?

2. A firm is expected to make four dividend payments of 1.90. Then dividends are expected to stop for 3 periods. At that point the stock has a forecasted EPsS of $8.20 and a PE ratio of 18.1. If the required return of the stock is 15%, what is its intrinsic value?

3. Be able to explain the intrinsic and extrinsic components of an option’s premium, and be able to break down the premium into those two components. Know how to draw a graph that exhibits the premium and the intrinsic and extrinsic components.

Reference no: EM131931339

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