Mid Term Securities Analysis Essay

1139 WordsNov 19, 20125 Pages
Grading Summary These are the automatically computed results of your exam. Grades for essay questions, and comments from your instructor, are in the "Details" section below. | Date Taken: | 5/25/2012 | Time Spent: | 2 h , 45 secs | Points Received: | 161 / 210 (76.7%) | | Question Type: | # Of Questions: | # Correct: | Multiple Choice | 8 | 7 | Essay | 5 | N/A | | | Grade Details | 1. | Question : | (TCO D) Find the current dividend on a stock, given that the required return is 8 percent, the dividend growth rate is 5 percent, and the stock price is $50 per share. | | | Student Answer: | $1.75 | | | $2.00 | | | $1.25 | | | $1.43 | | | | Comments: | | | | 2. |…show more content…
The annual dividend growth rate is 6.93 percent, and the required rate of return on the stock is 10.25 percent. Calculate the current price of the stock. Do not use a financial calculator or an online calculator. You must show your work. | | | Student Answer: | | To calculate the current price of a stock we use the following formula P=D1/k-g P=4.66/(.1025-.0693)= $140.36 | | | | Comments: | | | | 11. | Question : | (TCO D) Company XYZ is expected to grow at 10% annually forever, and its dividend in the next 12 months is expected to be $2.50, and its required rate of return is 17.5%. a. What is its intrinsic value?. b. If the current price is equal to its intrinsic value, what is next year's expected price?. c. Assume you buy the stock now and sell it after receiving the $2.50 dividend one year from now. What would be your anticipated capital gain in percentage terms? . What is the dividend yield and the holding period return?. | | | Student Answer: | | a) V0= D1/k-g = 2.50/(.175-.10) = 33.33 b) The dividend in year 2 will be D2= 2.50(1.10)=$2.75, therefore P1= 2.75/(.175- .10)= $36.67 c) 36.67-33.33=3.34, capital gain percentage will be 3.34/33.33= 10.02%, the dividend yield will be 2.50/33.33=7.5% | | | | Comments: | | | | 12. | Question : | (TCO E) In the past 10 years, Behavioral Finance has begun to explain the qualitative side of market movements and investor decisions. Explain the concept and
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