1)Healthy Foods just paid its annual dividend of 1.45 a share. The firm recently announced that all futures dividends will be increased by 2.8 percent annually? What is one share of this stock worth to you if you require a 14 percent rate of return?

12.56

12.95

13.31

13.68

14.07

2)Managers at firm y believe that project x will reduce the Betas of the firms common stock. Currently the opportunity cost of capital for the firm is 8%. The discount rate that managers should use to evaluate project x should be less than 8%

True

False

3)Diversifying a portfolio across various sectors and industries might do more than one of the following. However, the diversification must do which of the following?

Increase the expected risk premium

Reduce the beta of the portfolio to zero

Increase the security