The question wants you to price the share immediately after the last dividend payment. In order to do this we need to find the value of the last divided paid, \(D_0\) (or the value of the next dividend), since we have been given the dividend growth rate. The information at the start of the question tells us how to calculate \(D_0\):
First we need to profit
\(Profit = totalPremium Income - total Claims Paid - total Expenses Paid - required Reserve\)
Then we need to total amount of dividends paid:
Then we need the dividend per shareholder:
Now we have \(D_0=20\) , \(i=0.0125\) and \(g=0.05\) so we can price the share as we did in previous sections.