1.2) A corporation has never paid any dividends since foundation. The board has decided to start paying in a year the shareholders dividends of $3/share. These payments will continue permanently. If the discount rate for the stock is 12% and the payments are made annually, what is the current stock price?

1.3) You own a 2-stock portfolio. Stock Y with a variance of 20% and stock Z with a variance of 40%. If beta of stock Y is 0.9 and that of stock Z is 0.8, determine the stock with the highest firm-specific risk.