Why does the future value increase as the compounding period shortens?
November 8th, 2022
A-Future Value: What is the future value in three years of $1000 invested in an account with a stated annual interest rate of 8 percent,
a. Compound annually?
b. Compound Semiannual?
c. Compound monthly?
d. Compound Continuously?
e. Why does the future value increase as the compounding period shortens?
B-Stock Valuation: Suppose you know that a company’s stock currently sells for $70 per share and the required return on the stock is 12 percent. You also know that the total return on the stock is evenly divided between a capital gains yield and a dividend yield. If it’s the company’s policy to always maintain a constant growth rate in its dividends,
What is the current dividend per share?