1. The current quarterly dividend on the common stock of your company is $0.30, the riskadjusted discount rate is 16%, and the management of the firm believes that dividends will be increased by 1.2% per quarter. What is the current share price of this company?

a. $27.11 b. $20.51 c. $20.27 d. $10.84 e. None of the above

2. A stock is currently priced at $55 and is expected to pay a dividend of $2.57 next year. If the dividends are expected to grow at 5.5 percent per year forever, what is the required return on the stock?

a. 8.27% b. 10.17% c. 10.43% d. Insufficient information to solve this problem e. None of the above

3.

Which of the following statements regarding bond pricing is true?

a. The lower the yield to maturity, the more valuable the bond is

b. When the yield to maturity rises, the bond price also rises, all else the same

c. Bonds with longer maturities are generally (all else the same) more valuable than bonds with shorter maturities

d. All else the same, bonds with larger coupon payments will have a lower price today

e. None of the above