Answered

Westonci.ca offers fast, accurate answers to your questions. Join our community and get the insights you need now. Explore thousands of questions and answers from a knowledgeable community of experts ready to help you find solutions. Connect with a community of professionals ready to help you find accurate solutions to your questions quickly and efficiently.

Suppose that a share of common stock is expected to pay a $3 dividend one year from now, and thereafter each annual dividend payment will increase by 4% over the prior payment. The effective annual interest rate is 12%. Find the modified duration of this share of stock.

Sagot :

Tundexi

Answer:

13

Explanation:

Modified duration of stock = (1 + Growth rate) / (Effective rate - Growth rate)

Modified duration of stock = (1 + 4%) / (12% - 4%)

Modified duration of stock = (1 + 0.04) / 0.08

Modified duration of stock = 1.04 / 0.08

Modified duration of stock = 13

So, the modified duration of this share of the stock is 13.

Thanks for stopping by. We are committed to providing the best answers for all your questions. See you again soon. We hope you found what you were looking for. Feel free to revisit us for more answers and updated information. Stay curious and keep coming back to Westonci.ca for answers to all your burning questions.