Answer:
0.00573
Explanation:
Today's bond cost is $99.43
The bond's value at the year's end is $100
The difference calculates to: $100 - $99.43 = $0.57
This amount of $0.57 indicates the bond's yield. Therefore, the yearly yield is computed as $0.57/$99.43 = 0.00573
This yield represents the one-year discount rate applicable for a future value of $100, where its present value is $99.43.
Final Answer
0.00573
The intrinsic value of Stock C is $300. The expected dividend to be paid is $3, with a dividend growth rate of 9%. Stock C requires a return of 10%, while Stock D requires a return of 13%. We determine the intrinsic value using the DDM method. The intrinsic value formula is Upcoming Dividend ÷ (Required rate of return - Growth rate). In this case, it calculates to 300, indicating the intrinsic value of Stock C.
