3. You are considering acquiring a common stock that you would like to hold for one year. You

expect to receive both $1.25 in dividends and $32 from the sale of the stock at the end of the

year. The maximum price you would pay for the stock today is _____ if you wanted to earn a

10% return.

A. $30.23

B. $24.11

C. $26.52

D. $27.50

E. None of these is correct

4. Torque Corporation is expected to pay a dividend of $1.00 in the upcoming year. Dividends

are expected to grow at the rate of 6% per year. The risk-free rate of return is 5% and the

expected return on the market portfolio is 13%. The stock of Torque Corporation has a beta of 1.2.

What is the return you should require on Torque's stock?

A. 12.0%

B. 14.6%

C. 15.6%

D. 20%

E. None of these is correct