Discussion:
1. Based upon the Gordon Growth Model, calculate the anticipated market price of a stock that is paying dividends at a constant growth rate of 6.25%, with a recent dividend of $1.00, and a required return rate of 15%. (Show all work/calculations/formulas.)
You would like to consider purchasing a stock that is selling for $90 and pays $2.33 a year in dividends. It is predicted that the stock is going to sell for $114 one year from now, and you would like to earn 15% on the investment. Should you purchase the stock today- based upon the One-Period Valuation Model? And, what should the market price be today? (Show all work/calculations/formulas) Your response should be at least 220 words in length. You are required to use at least your textbook as source material for your response. All sources used, including the textbook, should be referenced; paraphrased and quoted material should have accompanying citations.
2. We are currently bidding on Treasury bills and have determined that we should have a 5% return for a $1,000 T-Bill that will mature in one year. How much would we be willing to bid on the Treasury bill? If we are bidding on a 13 weeks Treasury bill with a 1% return and a 26 weeks Treasury bill with a 2% return for a $1,000 T-bill, how much would we be willing to bid on the Treasury bills? (Show all work/calculations/formulas.) Your response should be at least 220 words in length. You are required to use at least your textbook as source material for your response. All sources used, including the textbook, should be referenced; paraphrased and quoted material should have accompanying citations.
3. We are purchasing a 28-day Treasury bill, during a normal year (non-leap year), and want to find out both the discount rate and the investment rate. If we purchase the bill for $998, what are the two rates? If we purchase a 91 day Treasury bill for $995, what are the two rates? (Show all work/calculations/formulas.) Your response should be at least 220 words in length. You are required to use at least your textbook as source material for your response. All sources used, including the textbook, should be referenced; paraphrased and quoted material should have accompanying citations.
4. What is the difference between primary markets and secondary markets?
Your response should be at least 220 words in length. You are required to use at least your textbook as source material for your response. All sources used, including the textbook, should be referenced; paraphrased and quoted material should have accompanying citations.
5. Discuss how the United States exchange rate would react to the nominal rates, and the real interest rate. Share with your classmates the past examples.