You are planning to buy 100 shares preferred stock, either Stock A or Stock B. Stock A pays an
Question # 00051869
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Updated on: 03/03/2015 05:21 PM Due on: 03/12/2015
1-
You are planning to buy 100 shares preferred stock, either Stock A or
Stock B. Stock A pays an annual dividend of $4.50 and has a market price
of $35. Stock B pays an annual dividend of $4.25 and has a market price
of $36. If your required rate of return is 12%, which stock should you
buy? HINT: Calculate the appropriate metric and decide.
2- You intend to buy Marigo common stock at $100 per share, hold it for one year, and sell it after receiving a cash dividend of $6. How much will the stock price have to appreciate for you to achieve a required rate of return of 11%?
3- Which is better, a $40 stock or a $4 stock? Explain very briefly.
4- Show the equation/formula you would use to calculate the average annual rate of return on a stock you bought on January 27, 2002 for $100 and sold on January 27, 2012 for $150? Assume that dividend payout was zero.
5- Construct a table to succinctly compare and contrast the building blocks of stock and bond valuation.
2- You intend to buy Marigo common stock at $100 per share, hold it for one year, and sell it after receiving a cash dividend of $6. How much will the stock price have to appreciate for you to achieve a required rate of return of 11%?
3- Which is better, a $40 stock or a $4 stock? Explain very briefly.
4- Show the equation/formula you would use to calculate the average annual rate of return on a stock you bought on January 27, 2002 for $100 and sold on January 27, 2012 for $150? Assume that dividend payout was zero.
5- Construct a table to succinctly compare and contrast the building blocks of stock and bond valuation.
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/5
Solution: You are planning to buy 100 shares preferred stock, either Stock A or Stock B. Stock A pays an