1. Angelo Company just paid a dividend of $2.00 (D0). It expected to increase by 12% per year for the next three years. Growth will slow down to 8% per year for the following three years, and finally slow to a 5% per year thereafter. Your required rate of return is 25%, how much you are willing to pay for this stock?

a. $13.127 b. $12.953 c. $12.671 d. $12.594 e. $12.456

2. What is the expected return of the economy? (Chapter 6, slide 11-12)

a. 8.55% b. 8.65% c. 8.75% d. 8.85% e. 9.00%

3. What is the standard deviation of the expected return? (Chapter 6, slide 14-16)

a. 9.651% b. 9.731% c. 9.813% d. 9.916% e. 9.987%

Use the following information for question 2 to question 3. Economic Conditions Rate of Return Probability 0.31 20% Strong economy, no inflation Weak economy, above- average inflation No major change in economy 0.29 -5% 0.4 10%