1. Crofter's common stock pays a dividend of $1.00 per quarter. If the price of the stock is $45.00 and the expected dividend growth rate is 5%, what is its nominal (not effective) rate of return? (5 marks) 2. James Green is considering building an investment portfolio (Portfolio Z) containing two assets, X and Y. Asset X will represent 40% of the dollar value of the portfolio and asset Y will account for the other 60%. The returns over 3 years of the two assets X and Y are provided below: Years X Y 2010 10% 35% 2011 12% 20% 2012 15% 17% a) Calculate expected return of the portfolio Z for each year and over 3 years period. (3+1 marks) b) Calculate risk and coefficient of variation for portfolio Z over the three years period. (3+2 marks) c) Will it be beneficial for James Green to invest in the portfolio? Briefly explain why. (2 marks) 3. You bought a 13 years corporate bond a year ago which is currently selling at $942, has a par value of $1000 and semiannual coupon rate of 7%. What is its approximate yield to maturity? (5 marks) 4. Baker Labs has total assets of 400 million. 100 million is Long Term Debt (Bonds), 100 million is Preferred Stock and the rest are finance by Common Stock equity. The After Tax-Cost of Debt is 11.96%. Their preferred stocks give a dividend of 9%, have a par value of 100 and are sold in the market for 70. Therefore, the cost of preferred stock is 12.85%. Additional $3 per share also has to be paid for floatation. The company wishes to calculate cost of common stock equity by using these data- The risk-free rate 5.5 percent, market risk premium 5 percent and the stock's beta 1.4. So, the cost of common stock is 12.5% Calculate the Weighted Average Cost of Capital for Baker. (5 marks) 5. a) Vang Inc. is considering Projects S and L, whose cash flows are shown below. These projects are mutually exclusive, equally risky, and not repeatable. If the decision is made