(1) There are only 2 investment options: share A or B. Company A has a current share price of $1.5 and is expected to pay an annual dividend of $0.10 next year. The dividend is expected to remain at this level forever. Company B recently paid a dividend of $0.30 and this dividend is expected to grow at 5% p.a. forever. What should the price of Company B's shares be if their risk levels and the risk/returns trade-off of the two companies are the same? (rounded to 2 decimal points):

A. $4.00

B. $2.70

C. $16.61

D. $18.90

(2) Market capitalization rate is:

Select one:

A. the market's rate of return

B. the market-consensus maximum rate of return of a share

C. the cash rate

D. the market-consensus estimate of the appropriate discount rate for free cash flow to equity

(3)

Ralph took a long position on a T-Bond futures contract, at a futures price of $999 (per $1000 face value). It is now the maturity date of the futures contract. The price of the T-Bond itself is currently $987. Calculate Ralph's payoff within his futures contract (per $1000 face value).

Select one:

A. -$12

B. $0

C. $12

D. $24