1. Investors of Gilat Networks, Ltd. require a 6% rate of return on its stock.

1. What is Gilat Networks, Ltd.s value if the previous dividend was Do = $12 and investors expect dividends to grow at constant annual rate of

(a) -1%, (b) 0%, (c) 2%, or (d) 5%

1b. Based on data from (i) above, what would be the constant growth model value of Gilat Networks, Ltd. if the required rate of return was 6% and the expected growth rate was (a) 6%, or (b) 12%? After showing the calculation explain whether the answers for (a) and (b) make sense

2.

Which of the following choice is incorrect? (2 pts.)

	a.	a bond with longer maturity has high level of reinvestment risk
	b.	a bond with shorter maturity has low level of price and high level of reinvestment risk
	c.	a bond with higher coupon has high level of reinvestment risk
	d.	a bond with shorter maturity has low level of price risk
	e.	a bond with higher coupon has low level of price risk

3.

Using Securities Market Line Equation and given the information below, which of the following stock has the lowest risk?

	a.	Stock with the required rate of return is 5%, the risk free rate is 1.5%, rate of return on market portfolio is 3%
	b.	Stock with the required rate of return is 6%, the risk free rate is 1.5%, rate of return on market portfolio is 3%
	c.	Stock with the required rate of return is 4%, the risk free rate is 1.5%, rate of return on market portfolio is 7%
	d.	Stock with the required rate of return is 7%, the risk free rate is 1.5%, rate of return on market portfolio is 5%