Assume that one year from now; you will deposit Rs. 1,000 into a saving account that pays 8%
interest. If the bank compounds interest semi-annually, how much will you have in your account
four years from now?
Question No: 17 ( Marks: 3 )
How much should you pay for the preferred stock of the PST Corporation, if it has Rs. 50 par
value, pays Rs. 20 a share in annual dividends, and your required rate of return is 15%.
Question No: 18 ( Marks: 3 )
What is a portfolio? Why an investor should invest his/her funds in a portfolio rather than in the
stocks of a single corporation.
Question No: 19 ( Marks: 3 )
What do you mean by yield to maturity (YTM) of a bond? Explain briefly.
Question No: 20 ( Marks: 3 )
Explain briefly the Constant Growth Dividends Model of common stocks valuation.
Question No: 21 ( Marks: 10 )
Snyder Computer Chips Inc. is experiencing a period of rapid growth. Earnings and dividends are
expected to grow at a rate of 15% during the next 2 years, at 13% in the third year, and at a
constant rate of 6% thereafter.
Snyder's last dividend was Rs. 1.15, and the required rate of return on the stock is 12%.
Required:
I. Calculate the expected dividends of the firm in the first three years.
II. Calculate the fair value per share of these stocks at the end of third year
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