CalCPA Window Help Homework 1 Questions FIN 350 Summer 2018p

CalCPA Window Help Homework 1 Questions FIN 350 Summer 2018.pdf (page 3 of 4) Q Search 4. If Treasury bills are currently paying 4-s /0 and the inflation rate is 1.6%, what is the approximate real rate of interest? The exact real rate? Chapter 7 Gilmore Inc. just paid a divident of $2.35 per share on its stock. The dividends are expected to grow at a constant rate of41% per year, indefinitely. If investors require a return a 10.4% on this stock, what is the current price? 1. 2, Mitchell Inc. has a constant 4.6% percent growth rate in its dividends. If the company has a dividend yield of 5.8%, what is the required return on the company\'s stock. Section 6 MacBook Air

Solution

As per policy, only one question is allowed to answer at a time, so answering first two questions:

2.35 ( 1 + 0.041) / 0..104 - 0.041 = $38.83

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4) Real rate of interest = Current interest rate - Inflation rate = 4.5% - 1.6% = 2.90%
Ch 7
Ans 1)
Current stock price = D0 * (1 + g) / R - g
2.35 ( 1 + 0.041) / 0..104 - 0.041 = $38.83 ===========================================