0 |
1/2 |
1 |
1-1/2 |
2 |
••• |
9-1/2 |
10 |
10-1/2 |
11 |
••• |
$2.500 |
$2.500 |
$2.500 |
$2.500 |
••• |
$2.500 |
$2.500 |
$2.50 x 1.01 |
$2.50 x 1.01^{A}2 |
etc. |
a. At what price would you expect OPI’s stock to sell at the end of the tenth year if the market required an annual rate of return (APR) of 18%, compounded semiannually, at that time?
b.. What would you offer to pay for one share of OPI’s common stock today (time zero) if you required an APR of 20%, compounded semiannually?
c. Suppose that after ten years the market required a semiannual rate of return on OPI’s come stock of 6%, but agreed with the dividend forecasts depicted above. At what price would a share of OPI’s stock sell at the end of the tenth year?
d.What rate of return, expressed as an APR, would you earn if you purchased a share of OPI’s stock at t = 0 for the price you determined in part b, collected all of the expected dividends and then sold the share at the end of the tenth year for the price determined in part c?
0 |
1/2 |
1 |
1-1/2 |
2 |
••• |
9-1/2 |
10 |
10-1/2 |
11 |
••• |
$2.500 |
$2.500 |
$2.500 |
$2.500 |
••• |
$2.500 |
$2.500 |
$2.50 x 1.01 |
$2.50 x 1.01^{A}2 |
etc. |
a. At what price would you expect OPI’s stock to sell at the end of the tenth year if the market required an annual rate of return (APR) of 18%, compounded semiannually, at that time?
b.. What would you offer to pay for one share of OPI’s common stock today (time zero) if you required an APR of 20%, compounded semiannually?
c. Suppose that after ten years the market required a semiannual rate of return on OPI’s come stock of 6%, but agreed with the dividend forecasts depicted above. At what price would a share of OPI’s stock sell at the end of the tenth year?
d.What rate of return, expressed as an APR, would you earn if you purchased a share of OPI’s stock at t = 0 for the price you determined in part b, collected all of the expected dividends and then sold the share at the end of the tenth year for the price determined in part c?
Don't hesitate - Save time and Excel
Assignmentsden brings you the best in custom paper writing! To get started, simply place an order and provide the details!
Place Order