For a price of $1040, Camille will sell you a share which just paid a dividend of $100, and is expected to pay dividends every year forever, growing at a rate of 5% pa.
So the next dividend will be ##100(1+0.05)^1=$105.00##, and the year after it will be ##100(1+0.05)^2=110.25## and so on.
The required return of the stock is 15% pa.
A stock pays annual dividends. It just paid a dividend of $3. The growth rate in the dividend is 4% pa. You estimate that the stock's required return is 10% pa. Both the discount rate and growth rate are given as effective annual rates. Using the dividend discount model, what will be the share price?
In mid 2009 the listed mining company Rio Tinto announced a 21-for-40 renounceable rights issue. Below is the chronology of events:
- 04/06/2009. Share price opens at $69.00 and closes at $66.90.
- 05/06/2009. 21-for-40 rights issue announced at a subscription price of $28.29.
- 16/06/2009. Last day that shares trade cum-rights. Share price opens at $76.40 and closes at $75.50.
- 17/06/2009. Shares trade ex-rights. Rights trading commences.
All things remaining equal, what would you expect Rio Tinto's stock price to open at on the first day that it trades ex-rights (17/6/2009)? Ignore the time value of money since time is negligibly short. Also ignore taxes.
A stock just paid its annual dividend of $9. The share price is $60. The required return of the stock is 10% pa as an effective annual rate.
What is the implied growth rate of the dividend per year?
Your poor friend asks to borrow some money from you. He would like $1,000 now (t=0) and every year for the next 5 years, so there will be 6 payments of $1,000 from t=0 to t=5 inclusive. In return he will pay you $10,000 in seven years from now (t=7).
What is the net present value (NPV) of lending to your friend?
Assume that your friend will definitely pay you back so the loan is risk-free, and that the yield on risk-free government debt is 10% pa, given as an effective annual rate.
An investor bought a 20 year 5% pa fixed coupon government bond priced at par. The face value is $100. Coupons are paid semi-annually and the next one is in 6 months.
Six months later, just after the coupon at that time was paid, yields suddenly and unexpectedly rose to 5.5% pa. Note that all yields above are given as APR's compounding semi-annually.
What was the bond investors' historical total return over that first 6 month period, given as an effective semi-annual rate?
Below is the Australian central bank’s cash rate.
From 2011 to 2017 the Australian central bank has implemented:
What is the Cash Conversion Cycle for a firm with a:
- Payables period of 1 day;
- Inventory period of 50 days; and
- Receivables period of 30 days?
All answer options are in days:
By convention, money market securities' yields are always quoted as: