1. Which of the following statements best describes how a change in a firms stock price would affect a stocks capital gains yield?

a.) The capital gains yield on a stock that the investor already owns has a direct relationship with the firms expected future stock price.

b.) The capital gains yield on a stock that the investor already owns has an inverse relationship with the firms expected future stock price.

2. Which of the following statements will always hold true?

a.) It will never be appropriate for a rapidly growing startup company that pays no dividends at presentbut is expected to pay dividends at some point in the futureto use the constant growth valuation formula.

b.) The constant growth valuation formula is not appropriate to use for zero growth stocks.

c.) The constant growth valuation formula is not appropriate to use unless the companys growth rate is expected to remain constant in the future.