1. Weisbro and Sons common stock sells for $53 a share and pays an annual divide

Question

1.

Weisbro and Sons common stock sells for $53 a share and pays an annual dividend that increases by 4.8 percent annually. The market rate of return on this stock is 10.50 percent. What is the amount of the last dividend paid by Weisbro and Sons?

$3.17

$2.88

$5.31

$2.43

$2.83

2. Shares of common stock of the Samson Co. offer an expected total return of 16.2 percent. The dividend is increasing at a constant 5.6 percent per year. The dividend yield must be:

5.60 percent.

10.60 percent.

16.20 percent.

21.80 percent.

2.89 percent.

3.

The term structure of interest rates is affected by which of the following?
I. Interest rate risk premium
II. Real rate of interest
III. Default risk premium
IV. Inflation premium

I and II only

II and III only

I, III, and IV only

I, II, and IV only

I, II, III, and IV

4. A bond that pays interest annually yields a rate of return of 6.50 percent. The inflation rate for the same period is 3 percent. What is the real rate of return on this bond?

1.03 percent

3.40 percent

2.17 percent

3.00 percent

9.50 percent

Weisbro and Sons common stock sells for $53 a share and pays an annual dividend that increases by 4.8 percent annually. The market rate of return on this stock is 10.50 percent. What is the amount of the last dividend paid by Weisbro and Sons?

Explanation / Answer

Calculation of dividend paid last year :

$5.31 ( answer)

Selling price of share 53 Market rate of return 10.50% Price after one year ( 53*1.105) 58.565 Dividend current year ( 58.565-53)           5.57 Increase in dividend payout from last year 4.80% Dividend last year ( 5.565/1.048)           5.31

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