Investment

You just called J.G. Wentworth. You told them that you had just found out you will be receiving $10,000 each year for five years and the first payment will occur one year from now.The underwriter at J.G. Wentworth tells you that they will give you $30,000 today in exchange for the right to the future $10,000 payments.

What annual interest rate are you being charged by J.G. Wentworth if you decide to get the $30,000 from them?

A company expects dividends to grow at 18% per year for the next 11 years before leveling off at 5 percent into perpetuity. The required return on the company’s stock is 12 percent.

If the dividends per share just paid was $1.94, what is the stock price?

You have invested equally in the following four security portfolio, market portfolio, risk free asset, a stock with a beta of 1.4, and a bond with a beta of 0.3.

What is the beta of your portfolio? show your answer to 2 decimal places.

Solution:

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