Aprestigious investment bank designed a new security that pays a quarterly dividend of $3.70 in perpetuity. the first dividend occurs one quarter from today.

what is the price of the security if the annual percentage rate is 3.3 percent compounded quarterly?

the price of the security will be $448.485

Step-by-step explanation:

Annual rate of interest = 3.3%

then Interest rate per quarter (r) will be = 0.033/4

= 0.00825

= 0.825%

now it is given that

Cash flows in the first quarter, C1 = $3.70

Then Present value of perpetuity = C1 /r

= $3.70/ 0.825%

= $448.485

Therefore, the price of the security will be $448.485

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