Question
In: Finance
What is the value of a stock with current dividend paying $1, a growth rate of...
- What is the value of a stock with current dividend paying $1, a growth rate of 5% on the dividends, discount rate of 12% that will be held for 5 years and then sold at $18?
Solutions
Expert Solution
D1=(1*1.05)=1.05
D2=(1.05*1.05)=1.1025
D3=(1.1025*1.05)=1.157625
D4=(1.157625*1.05)=1.21550625
D5=(1.21550625*1.05)=1.27628156
Hence current price=Future dividend and value*Present value of discounting factor(rate%,time period)
=1.05/1.12+1.1025/1.12^2+1.157625/1.12^3+1.21550625/1.12^4+1.27628156/1.12^5+18/1.12^5
=$14.35(Approx)
jeff jeffy answered 2 years agoRelated Solutions
The current price of a non-dividend-paying stock is $50. The risk-free interest rate is 1%. Over...
The current price of a non-dividend-paying stock is $50. The
risk-free interest rate is 1%. Over the next year, it is expected
to rise to $52 or fall to $47. An investor buys a European put
option with a strike price of $53. What is the value of the
option?
Group of answer choices:
A: $0.93
B: $1.93
C: $1.95
D: $2.47
Question 1 A non – dividend – paying stock with a current price of £52, the...
Question 1
A non – dividend – paying stock with a current price of £52, the
strike price is £50, the volatility is 30% pa, the risk free
interest rate is 12% pa, and the time to maturity is 3 months?
b) Calculate the price of a put option price on
this stock?
b) Calculate the price of a call option on this
stock
c) Is the put-call parity of these options
hold?
If possible, please provide a detailed...
A rapidly growing firm is currently paying a dividend of $90. The dividend growth rate is...
A rapidly growing firm is currently paying a dividend of $90.
The dividend growth rate is expected to be 12% for the next 6
years. The dividend growth rate after the first 6 years is expected
to be 3% annually. The expected return on the market is 8%, the
risk free rate is 3% and the firm’s Beta is 25.
Calculate the estimated price (intrinsic value) for a share of
this firm’s stock.
What does this firm’s Beta measure?
Use...
The current price of a non-dividend paying stock is $50. Use a two-step tree to value...
The current price of a non-dividend paying stock is $50. Use a
two-step tree to value a European put option on the stock with a
strike price of $48 that expires in 6 months. Each step is 3
months, the risk-free rate is 4%, and u = 1.1 and d = 0.9. Please
enter your answer rounded to two decimal places (and no dollar
sign).
The current price of a non-dividend paying stock is $30. Use a two-step tree to value...
The current price of a non-dividend paying stock is $30. Use a
two-step tree to value a European call option on the stock with a
strike price of $28 that expires in 12months. Each step is 6months,
the continuously compounded risk-free rate is 8% per annum.
Calculate the European call option price when u=1.2 and d=0.8.
The current price of non-dividend paying stock is $50. Use a two-step tree to value an...
The
current price of non-dividend paying stock is $50. Use a two-step
tree to value an American put option on the stock with a strike
price of $52 that expires in 12 months. Each step is 6 months and
the continuously compounded risk-free rate is 6% per annum.
Calculate the American put option price. Assume that u=1.2 and
d=0.8.
The current price of a non-dividend paying stock is $50. Use a two-step tree to value...
The current price of a non-dividend paying stock is $50. Use a
two-step tree to value a American put option on the stock with a
strike price of $50 that expires in 12 months. Each step is 6
months, the risk free rate is 5% per annum, and the volatility is
50%. What is the value of the option according to the two-step
binomial model. Please enter your answer rounded to two decimal
places (and no dollar sign).
The current price of a non-dividend paying stock is $50. Use a two-step tree to value...
The current price of a non-dividend paying stock is $50. Use a
two-step tree to value a European put option on the stock with a
strike price of $50 that expires in 12 months. Each step is 6
months, the risk free rate is 5% per annum, and the volatility is
50%. What is the value of the option according to the two-step
binomial model. Please enter your answer rounded to two decimal
places (and no dollar sign).
The current price of a non-dividend paying stock is $30. Use a two-step tree to value...
The current price of a non-dividend paying stock is $30. Use a
two-step tree to value a European put option on the stock with a
strike price of $32 that expires in 6 months. Each step is 3
months, the risk free rate is 8%, and u = 1.1 and d = 0.9.
The current price of a non-dividend paying stock is $30. Use a two-step tree to value...
The current price of a non-dividend paying stock is $30. Use a
two-step tree to value a European call option on the stock with a
strike price of $32 that expires in 6 months. Each step is 3
months, the risk free rate is 8% per annum with continuous
compounding. What si the option price when u = 1.1 and d = 0.9.
$1.29
$1.49
$1.69
$1.89
ADVERTISEMENT
ADVERTISEMENT
Latest Questions
- identify one intrapersonal relationship and evaluate its component.
- Using Python in vs code: The distribution of letters in a document has a distinctive and...
- Why is De Beers exploring the diamond reselling market? How does the creation of IIDV affect...
- programming in Python The body mass index (BMI) is calculated as a person’s weight (in lb)...
- 1. Show the steps in merging A and B into C where A= 8, 12, 19,...
- 1. Given the following information, determine the beta coefficient for Stock L that is consistent with...
- Generate the first ten rows of Pascal triangle using MATLAB. Post code in the response
ADVERTISEMENT