Individuals invest a total of $80.9 billion in stock and corporations invest $11
ID: 2639357 • Letter: I
Question
Individuals invest a total of $80.9 billion in stock and corporations invest $11.08 billion. The remaining stock is held by the institutions. All three groups simply seek to maximize their after-tax income.
These payoffs are expected to persist in perpetuity. The low-payout stocks have a total market value of $100.9 billion, the medium-payout stocks have a value of $50.9 billion, and the high-payout stocks have a value of $120.9 billion.
Suppose that this marginal group of investors requires a 12% after-tax return. What are the prices of the low-, medium-, and high-payout stocks? (Do not round intermediate calculations. Round your answers to 2 decimal places.)
Calculate the after-tax returns of the three types of stock for each investor group. (Do not round intermediate calculations. Round your answers to 2 decimal places.)
What are the dollar amounts of the three types of stock held by each investor group? (Leave no cells blank - be certain to enter "0" wherever required. Enter your answers in billions rounded to 2 decimal places.)
Suppose that there are just three types of investors with the following tax rates:
Explanation / Answer
A. Institutions
B. Price of Law-payout stock $ 6.62 billion
Price of Medium-payout stock $ 7.43 billion
Price of High-payout stock $ 32.29 billion
C.
D.
Institutions Individuals Corporations Low-payout stock $ 1.79$ 0.40$ Medium-payout stock $ 2.01$ 0.45$ High-payout stock $ 8.72$ 1.94$