Explore BrainMass

Explore BrainMass

    Present Value & Annual Dividend

    This content was COPIED from BrainMass.com - View the original, and get the already-completed solution here!

    What is the present value of a contract that promises to make year end payments to you of $100 for the next 20 years if the interest rate is 5%? The level payments (PMT) are $100 and we know the interest rate and the duration of the contract.

    Suppose you are willing to pay $30 today for a share of stock which you will expect to sell at the end of year one for $32. If you require and annual rate of return of 12%, what must be the amount of the annual dividend which you expect to receive at the end of year one?

    © BrainMass Inc. brainmass.com June 4, 2020, 12:02 am ad1c9bdddf
    https://brainmass.com/economics/contracts/present-value-annual-dividend-315308

    Solution Preview

    Present Value & Annual Dividend
    What is the present value of a contract that promises to make year end payments to you of $100 for the next 20 years if the interest rate is 5%? The level payments (PMT) are $100 and we know the interest rate and the duration of the contract.

    PVA = W x 1 - 1 where PVA ...

    Solution Summary

    This solution is comprised of a detailed explanation to answer what is the present value of a contract that promises to make year end payments to you of $100 for the next 20 years if the interest rate is 5%.

    $2.19

    ADVERTISEMENT