Question

Demarius owns investment A and 1 share of stock B. The total value of his holdings is 2,443.27 dollars. Investment A is expected to pay annual cash flows to Demarius of 380 dollars per year with the first annual cash flow expected later today and the last annual cash flow expected in 6 years from today.   Investment A has an expected annual return of 11.56 percent. Stock B is expected to pay annual dividends of 37.01 dollars forever with the next dividend expected in 1 year. What is the expected annual return for stock B? Answer as a rate in decimal format so that 12.34% would be entered as .1234 and 0.98% would be entered as .0098.

Answer 1

Please refer to below spreadsheet for calculation and answer. Cell reference also provided.

Cell reference -