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Question
World-Tour Co. has just now paid a dividend of $2.83 per share (D0); the dividends are expected to grow at a constant rate of 6% per year forever. If the required rate of return on the stock is 16%, what is the current value on stock, after paying the dividend?
A. $30
B. $56
C. $70
D. $48
Answer
This answer is hidden. It contains 41 characters.
Related questions
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Suppose VS's stock price is currently $20. In the next six months it will either fall to $10 or rise to $30. What is the current value of a put option with an exercise price of $15? The six-month risk-free interest rate is 5% (periodic rate).
A. $5.00
B. $2.14
C. $0.86
D. $7.86
Q:
Suppose Ralph's stock price is currently $50. In the next six months it will either fall to $30 or rise to $80. What is the option delta of a call option with an exercise price of $50?
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A call option has an exercise price of $100. At the final exercise date, the stock price could be either $50 or $150. Which investment would combine to give the same payoff as the stock?
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B. Lend PV of $50 and sell two calls
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Briefly explain the term "option delta."
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Using the binomial model, what is the value of a three month option given the following data and assuming there are no time periods other than three months? The exercise price is $40; stock price is $46; the upside price is $48; the downside price is $34; the 3 month interest rate is 2%. The upside and down side have equal probabilities.
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B. Fall exactly by the amount of the dividend
C. Fall by less than the amount of the dividend
D. Cannot be predicted
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One key assumption of the Miller and Modigliani (MM) dividend irrelevance argument is that:
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B. There are no capital gains taxes
C. All investments are risk-free
D. New shares are sold at a fair price
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Generally, investors view the announcement of open-market repurchase of stocks as:
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Generally, investors interpret the announcement of a decrease in dividends as:
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Generally, investors interpret the announcement of an increase in dividends as:
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B. good news and the stock price increases
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D. very bad news and the stock price plunges