Homework Answers
| 5) | (1+ Real Rate) x (1 + Inflation Rate ) = | (1+ Nominal rate) | ||||
| (1+ Real Rate) x (1 + 3% ) = | (1+ 10%) | |||||
| 1+Real Rate = | 1.1/1.03 | |||||
| 1+Real Rate = | 1.067961 | |||||
| Real Rate = | 1.067961 | -1 | ||||
| Real Rate = | 0.067961 | Or | ||||
| 6.7961% | ||||||
| 6) | Dividend Yield = | Dividend/ Price x 100 | ||||
| Dividend = | 3.1 | |||||
| Price (P0) = | Dividend 1/(Re-g) | |||||
| = | 3.1 x(1.025)/(0.08-0.025) | |||||
| = | 57.77273 | |||||
| Dividend Yield = | 3.1/57.77 x 100 | |||||
| 5.3659% | ||||||
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