A stock is expected to pay the following dividends:
Cash Flows of a Stock | ||||||
Time (yrs) | 0 | 1 | 2 | 3 | 4 | ... |
Dividend ($) | 2 | 2 | 2 | 10 | 3 | ... |
After year 4, the dividend will grow in perpetuity at 4% pa. The required return on the stock is 10% pa. Both the growth rate and required return are given as effective annual rates.
What is the current price of the stock?
Question 215 equivalent annual cash flow, effective rate conversion
You're about to buy a car. These are the cash flows of the two different cars that you can buy:
- You can buy an old car for $5,000 now, for which you will have to buy $90 of fuel at the end of each week from the date of purchase. The old car will last for 3 years, at which point you will sell the old car for $500.
- Or you can buy a new car for $14,000 now for which you will have to buy $50 of fuel at the end of each week from the date of purchase. The new car will last for 4 years, at which point you will sell the new car for $1,000.
Bank interest rates are 10% pa, given as an effective annual rate. Assume that there are exactly 52 weeks in a year. Ignore taxes and environmental and pollution factors.
Should you buy the or the ?
Suppose you had $100 in a savings account and the interest rate was 2% per year.
After 5 years, how much do you think you would have in the account if you left the money to grow?
When someone says that they're "buying American dollars" (USD), what type of asset are they probably buying? They're probably buying:
The saying "buy low, sell high" suggests that investors should make a:
Assets A, B, M and ##r_f## are shown on the graphs above. Asset M is the market portfolio and ##r_f## is the risk free yield on government bonds. Assume that investors can borrow and lend at the risk free rate. Which of the below statements is NOT correct?
Mr Blue, Miss Red and Mrs Green are people with different utility functions. Which of the statements about the 3 utility functions is NOT correct?
Question 729 book and market values, balance sheet, no explanation
If a firm makes a profit and pays no dividends, which of the firm’s accounts will increase?
A stock has an expected return of 10% pa and you're 90% sure that over the next year, the return will be between -15% and 35%. The stock's returns are normally distributed. Note that the Z-statistic corresponding to a one-tail:
- 90% normal probability density function is 1.282.
- 95% normal probability density function is 1.645.
- 97.5% normal probability density function is 1.960.
What is the stock’s standard deviation of returns in percentage points per annum (pp pa)?