What is the value of a share which is expected to pay a dividend of $0.11 every six months forever,on the basis that you intend to hold the shares forever,and the Australian ten- year bond rate today is 7.29%?
A)$2.20
B)$3.08
C)$0.60
D)$1.51

Question

Quizplus · Accepted Answer

The value of the perpetuity can be calculated as follows:
PV = annual dividend amount / required rate of return
PV = 0.11 / (0.0729 / 2)
PV = 0.11 / 0.03645
PV = $3.02

So the value of the share is $3.02. Therefore, the best choice is B as it is the closest answer.

What Is the Value of a Share Which Is Expected