Question

2. (10 pts) Calculate: What is the future value of $3,000 annual deposits at 8% in 15 years (hint: FVIFA)? 3. Calculate: Petunia purchased 100 shares of XYZ at $25 one year ago. The stock paid a .16 quarterly dividend. Petunia sold 100 shares of the stock yesterday at $27. A. (10 points) what is Petunia's annual dividend yield on the investment? B. (10 points) After selling the stock, what is Petunia's total return yield on the investment?

Answer 1

$3,000 a 15 8% 2 Amount Years Rate FVIFA FV=A(1+i)^n Future value 3.17217 b $9,517 a*b 3 Quarterly dividend Annual dividend yield Initial investment $16 (100*0.$16) $64 $16*4 $2,500100*25 A Annual dividend yield 2.56% $64/$2,500 $200 100*($27-$25) $216 Capital gains Total Income (Dividend + Capital gain) B Total return yield 8.64% $216/$2,500)