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Date Posted: 06:58:58 05/03/02 Fri
Author: Marilyn
Subject: Re: Spring 2001 #9, #16, #17
In reply to: Dr. D. 's message, "Re: Spring 2001 #9, #16, #17" on 06:43:32 05/03/02 Fri

Thank you. Although the answer to #16 is $25.09. I was trying to see why I was off by 4 cents, but I now realize it's because I rounded the dividend and the answer didn't.

Thanks Again








>>Hi everyone:
>>
>>#9 Shouldn't it be 580.33 instead of 581.23?
>The problem should have read that the loan was
>compounded MONTHLY. Based on that, the correct asnwer
>is 581.23
>
>>#16 Shouldn't it be 25.05 instead of 25.09?
>Here are the checkpoints: D1=1.15; D2=1.3225 (this is
>as far as we need, since the div's "behave" after
>that;
>P1= 1.3225/(1.0-.05) = $26.45 ==> based on these,
>CF1=1.15 + 26.45 = 27.60; PV(at 10%) = $27.09
>
>>#17 Why can't the answer be all of the above?
>(a) is incorrect - the growth rate is not necessarily
>the same as the req'd rate of return.
>(c) is incorect, since the dividend yield is D1/Po
>
>Remember - the req'd rate of return = div yield +
>growth rate
>
>Hope this helps

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