Portfolio managers are frequently paid a proportion of the funds under management. Suppose you manage a $113 million equity of 6.3%. Dividends and portfolio value are expected to grow at a constant rate. Your annual portfolio offering a dividend yield (DIY) fee for managing this portfolio is 0.63% of portfolio value and is calculated at the end of each year. a. Assuming that you will continue to manage the portfolio from now to eternity, what is the present value of the management contract? Note: Do not round intermediate calculations. Enter your answer in millions rounded to 1 decimal places. b. What would the contract value be if you invested in stocks with a 5.3% yield? Note: Enter your answer in millions rounded to 2 decimal places. a. Present value $ 11.3 million b. Contract value $ 19.68 milllion

Portfolio managers are frequently paid a proportion of the funds under management. Suppose you manage a $113 million equity of 6.3%. Dividends and portfolio value are expected to grow at a constant rate. Your annual portfolio offering a dividend yield (DIY) fee for managing this portfolio is 0.63% of portfolio value and is calculated at the end of each year. a. Assuming that you will continue to manage the portfolio from now to eternity, what is the present value of the management contract? Note: Do not round intermediate calculations. Enter your answer in millions rounded to 1 decimal places. b. What would the contract value be if you invested in stocks with a 5.3% yield? Note: Enter your answer in millions rounded to 2 decimal places. a. Present value $ 11.3 million b. Contract value $ 19.68 milllion

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Description: Portfolio managers are frequently paid a proportion of the funds under management. Suppose you manage a $113 million equityportfolio offering a dividend yield (DIM) of 6.3%. Dividends and portfolio value are expected to grow at a constant rate. Your

Pfin (with Mindtap, 1 Term Printed Access Card) (mindtap Course List)

7th Edition

ISBN:9780357033609

Author:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Publisher:Randall Billingsley, Lawrence J. Gitman, Michael D. Joehnk

Chapter12: Investing In Stocks And Bonds

Section: Chapter Questions

Problem 1FPE: What makes for a good investment? Use the approximate yield formula or a financial calculator to...

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