please help me! 6. If the dividend, D1, is $1.92, and Po is $23.50, what is the
ID: 2765404 • Letter: P
Question
please help me!
6. If the dividend, D1, is $1.92, and Po is $23.50, what is the dividend yield? ____% If the total rate of return, r, is 14%, what is the capital gains yield? _____%
7. If the expected rate of return, rˆ, is less than the required rate of return, r, should you buy the stock? Yes -- No. Circle your answer. 2 pts. If you already own the stock, should you keep it or sell it? Circle your answer.
8. The price of preferred stock X is $65.00, and the dividend per share is 7% of the par value of $100. Calculate the required rate of return on the preferred stock, rp. _____%
9. If the required rate of return on preferred stock Y with an $8 dividend is 12%, what is the price of the stock? Vp = $___________
10. Stock Z will pay a dividend of $3.00, but forecasts no growth in the dividend. The current price of the stock, Po, is $30. Calculate the required rate of return, rs.
Explanation / Answer
6) Dividend Yield Formula = Cash Dividend for Share/Market Value per share = 1.92/23.50=0.082 or 8.17%
if total return ,r is 14% capital gain= 14% - 8.17 %= 5.83%
7) if expected rate of return ,r , is less tha required rate return ,r, I wont buy the stock , if I already hold it , I will sell off the stock.
8) required rate of rp= formula = V=Dp/Kp we have V=$ 65 Dp= 7% or $ 7 (100*7%)
65=7/Kp= > Kp= 7/65 =0.10769 or 10.78%
9) The price of preferred stock = V= Dp/Kp =8/0.12 => 66.67
10) stock Z dividend = $ 3 Price =$ 30 Kp = 3/30 => 0.1 or 10%
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