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Neville decides to buy 1 share of Firebolt stock and 1 share of Butterbeer stock in...

Neville decides to buy 1 share of Firebolt stock and 1 share of Butterbeer stock in order to teach his friends about stock valuation and what he learned in MA 390.

Professor X gives him the following information:

  • the price of 1 share of Firebolt stock is 50
  • the expected dividend growth rate for both stocks is 10%
  • the expected yield on both stocks is 15%
  • the dividend on Butterbeer stock at time 1 is 120% of the dividend on Firebolt stock

Neville casts an imperius curse on you and tells you to answer the following questions:

a. the total cost of buying 1 share of each stock today

b. the total expected value of 1 share of each stock in 1 year

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Answer #1

SATURDAY Expected dividend rom fue baltsha sx Shau podce x expected dividendgu 0 Srince dividend om Butteubeer stock is eq 0 haue pruice oh butterbeer stock xpected dividen60 dividerd late So, the totod cost f buying Ishau of each stock so+ 60 llo .00 APRIL 2010 6 2 13 4 15 6 17 18 7 19 20 2 22 23 24 25 18 26 27 28 29 30DAY 066-299 WK -10 March SUNDAY Total expedhed Vals each stoch m eachstockum ome

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