(1) As an investment manager, you frequently make decisions about investing in stocks versus other types of investments, and about types of stocks to purchase. You have noticed that investors tend to invest more heavily in stocks after interest rates have declined. You are considering this strategy as well. Is it rational to invest more heavily in stocks once interest rates have declined?

(2) A stock has a beta of 2.2, the risk-free rate is 6 percent, and the expected return on the market is 12 percent. Using the CAPM, what would you expect the required rate of return on this stock to be? What is the market risk premium?

(3) When computing the price of the stock with the dividend discount model, how would the price of a stock be affected if the required rate of return is increased. Explain the logic of this relationship.

(4) Assume that the expected inflation rate has just been revised upward by the market. Would the required return by investors who invest in the stocks be affected? Explain.

(5) What are the limitations of the Dividend Discount Model (DDM)?

PLEASE SOLVE AS SOON AS