1. Use the following formula to answer these questions: Pt=[D(1+g)/i-g] where Pt is the price today of a share of stock, D is the dividend (paid annually), i is the nominal interest rate (Wright uses k to denote this) and g is the annual growth rate of the dividend.

a. What is the price today if the interest rate is 5%, the company issues a dividend of $1 per share payable one year from today, and the dividend is not expected to change over time?

b. Suppose now that the $1 dividend paid at the end of this year is expected to increase 1% per year forever. For how much would a share of the stock sell now?

c. Lastly, what if you were only going to hold on to the stock for one year and you expected the stock price to be $20 one year from today? What should the stock sell for today? (Use the one-period valuation formula: Pt=(D/1+i)+(P"t+1"/1+i) , where Pt is the price today, and Pt+1 is the price one year from today.)