1a. The 10-year US Treasury bond has a yield-to-maturity of 3.5%. Your financial advisor suggests the current market risk premium is 5.5%. If your companys beta is 1.25, what should be the cost of common stock?

1b. Your businesss dividend last year, D₀, was $1.28. The business is expecting a growth rate in earnings and dividends of 6.5% in the future, i.e., g = 0.065. What is the current price of the common stock today (P₀)?