Shares in Brothers Grimm, Inc., manufacturers of gingerbread houses, are expected to pay a dividend of $5 in one year and to sell for $100 per share at that time.
How much should you be willing to pay today per share of Grimm: (LO4)

a. If the safe rate of interest is 5 percent and you believe that investing in Grimm carries no risk?

b. If the safe rate of interest is 10 percent and you believe that investing in Grimm carries no risk?

c. If the safe rate of interest is 5 percent but your risk premium is 3 percent?

d. Repeat parts a to

c, assuming that Grimm is not expected to pay a dividend but the expected price is unchanged.