1-

. LSP Co.s stock price is $58.88, and it recently paid a $2.00 dividend. This dividend is expected to grow by 35% for the next 5 years, then grow forever at a constant rate, g; and rs = 12%. At what constant rate is the stock expected to grow after Year 5? *

a) 9.5%

b) 6.25%

c) 15.75%

d) 33.33%

e) None of the above

2- You are considering an investment in LSPs stock, which is expected to pay a dividend of $2.00 a share at the end of the year (D1 = $2.00) and has a beta of 0.9. The risk-free rate is 5.6%, and the market risk premium is 6%. LSP currently sells for $25.00 a share, and its dividend is expected to grow at some constant rate g. Assuming the market is in equilibrium, what does the market believe will be the stock price at the end of 3 years? *

a) $32.32

b) $78.00

c) $27.32

d) $0

e) None of the above

3-

Maysam has $100,000 invested in a 2-stock portfolio. $45,000 is invested in Stock X and the remainder is invested in Stock Y. X's beta is 1.50 and Ys beta is 0.70. What is the portfolio's beta? *

a) 0.65

b) 1.06

c) 0.80

d) 1.49

e) None of the above

4-

Qwart Company's stock has a beta of 1.10, the risk-free rate is 4.25%, and the market risk premium is 5.50%. What is the firm's required rate of return? *

a) 10.46%

b) 11.65%

c) 10.30%

d) 12.25%

e) None of the above