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A firm recently paid a dividend of $7/share. Over the next
15 years, they will maintain their dividend at $7/share
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A firm recently paid a dividend of $7/share. Over the next 15 years,
they will maintain their dividend at $7/share. Then afterwards, they
will change their dividends to grow at a constant 6%/year every year,
forever. %.
a. How much dividend is paid in year 31?
b. What is the stock price?
2. A stock will pay the following dividends: $5 in year 1, $6 in year
2, $7 in year 3. After year 3, they will maintain a zero growth
dividend policy. %. Find the stock price.
3. A firm has a zero growth dividend policy and recently paid
$2/share. Next year, they will pay an abnormally large dividend
payment of $10/share. Afterwards, they will continue to pay their
constant dividend payments of $2/share. %. Find the stock price
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ARE 171B Department of Ag and Resource
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Important: – You must write your answers on the sheet on pg. 3 of
this assignment and
you must attach explanations and derivations of your answers.
– Please turn your homework in at lecture or directly to your TA.
– Late homeworks will automatically be given a score of zero. In this
homework assignment, you will get some data on the S&P 500
Index and on S&P
500 Index Options from the Internet and evaluate the performance of
the Black-Scholes option
pricing model.
Go to http://finance.yahoo.com. Enter the symbol ^SPX to obtain