.1. Calculate the value of a share of stock that is expected to pay $1 dividend at t=1, with dividends expected to grow at a constant rate of 2% per year forever thereafter. Use 14.5% as the discount rate.

a. $10.00 b. $6.90 c. $6.87 d. $8.00 e. $50.00

2. If you only know the time to maturity for a bond, what information can still you infer about the bond?

a. when the bond was originally issued c. the bonds coupon rate

b. the number of cash flows remaining for the bond d. both a and c

3. Leftover Salmon (LoS) Co. bonds pay an annual coupon of 9.5%. They have 8 years to maturity

and a face value of $1,000. Compute the value of LoS's bonds if investors' required rate of return is 10%.

a. $1,516.18 b. $1,027.17 c. $973.33 d. $950.00

4. If the market price of a bond increases, then:

a. the bonds yield to maturity increases. c. the bonds yield to maturity decreases.

b. the bonds coupon rate increases. d. both a and b.

5. All of the following are criticisms of the payback-period rule except:

a. Time value of money is not accounted for.

b. The cut-offs that are chosen by the firms that use this rule are subjective.

c. It uses accounting profits in its calculations, as opposed to CFs.

d. CFs occurring after the payback are ignored.

e. None of the above; all are criticisms of the payback-period rule.