14. What is the DDM price for a common stock with quarterly dividends, where the last dividend of 2:50 was paid yesterday:

(a) If dividends are assumed to grow at a quarterly nominal rate of 9% and the investor requires a return of 15% quarterly?

(b) If dividends are assumed to grow at a quarterly nominal rate of 9% only for 5 years, and then to a grow at a rate of 4%, again on a quarterly basis? (Hint: Show that the dividends can be modeled as a 5-year annuity at one rate, followed by a 5-

year deferred perpetuity [i.e., an infinite annuity] at another rate, where by ‘‘deferred’’

means the first payment is one-quarter year after t ¼ 5. See also exercise 7.).