1 the nominal rate of interest is composed ofthe real rate, Ask an Expert

Finance

1. The nominal rate of interest is composed of

the real rate plus an inflationary expectation.

the real rate plus a risk premium.

the risk-free rate plus an inflationary expectation.

the risk-free rate plus a risk premium.

2. MG recently paid a dividend of $1.75 per share, is currently expected to grow at a constant rate of 6%, and has a required return of 12.5%. MG has been approached to buy a new company. MG estimates if it buys the company, its constant growth rate would increase to 7.0%, but the firm would also be riskier, therefore increasing the required return of the company to 13%. If MG goes ahead with the purchase of the new company, will the value of MG increase or decreased by_________ per share?

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Financial Management, Finance

Category:- Financial Management
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