Question

1. Stock XYZ has a current dividend of $7.00 .
The dividend is expected to grow forever at a rate of 1.80% .
Based on the riskiness of XYZ, its discount rate is 2.00%
With this information, what is the dividend yield from today to period 1?

Group of answer choices

0.22%

1.80%

0.20%

1.98%

2. Assume you buy a bond with the following features

Bond maturity = 6
Coupon Rate = 4.00%
Face Value = $1,000
Annual Coupons

When you buy the bond the market interest rate = 4.00%
Immediately after you buy the bond the interest rate changes to 3.50%
What is the "price risk" effect in year 3 ?

Group of answer choices

$13.59

-$14.01

$14.01

-$13.59

-$14.43

$14.43

Answer 1

1)

Dividend yield:

= Discount rate – Growth rate

= 2.00% - 1.80%

= 0.20%

Hence, correct option is 0.20%

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