1. If corporate bond yields are at 8.4% and you are in the 34% federal marginal income tax bracket, at what level of municipal bond yields would you be indifferent between owning corporate bonds or muni bonds? Ignore the impact of state and local taxes.

A) 5.95%

B) 5.54%

C) 5.03%

D) 4.67%

E) 4.11%

2. ABC Corporation's common stock dividend yield is 3.61%, it just paid a dividend of $2.75, and is expected to pay a dividend of $2.89 one year from now. Dividends are expected to grow at a constant rate indefinitely. What is the required rate of return on ABC stock?

A) 7.3%

B) 8.7%

C) 9.5%

D) 10.6%

E) 11.2%

3 . Suppose NoGro, Inc. has just issued a dividend of $3.25 per share. Subsequent dividends will remain at $3.25 indefinitely. Returns on the stock of firms like NoGro are currently running 10%. What is the value of one share of stock?

A) $22.50

B) $27.25

C) $32.50

D) $37.25

E) $39.75