1.The preferred stock of BIDU Inc. pays an annual dividend of $7.50 and sells for $59.70 a share. What is the rate of return on this security?

A. 10.38 percent

B. 12.56 percent

C. 12.72 percent

D. 12.84 percent

2. A supernormal growth stock generally:

A. Is associated with a company that is experiencing rapid contraction

B. Tends to increase its dividends per share by 28% or more for an extended number of years

C. Has high growth dividends only for a limited number of years

D. Has dividends that grow at a high rate for the life of the stock

3. ALPHA Inc. has paid annual dividends of $1.25, $1.62, and $2.00 over the past three years. Dividends in the future are expected to grow at a constant rate of 4%. Which one of the following formulas should be used to compute the value of the stock today?

A. P₀ = D₁/(1+k)¹ + D₂/(1+k)² + ... + D_n/(1+k)ⁿ + P_n/(1+k)ⁿ

B. P₀ = D/k

C. P₀ = D₁/(1+k)ⁿ + g

D. P₀ = D₁/(k-g)