3. You are going to receive dividends from company ABC in years 1 and 2. After that the company will disappear. The dividends will be 100 in every period. What is the price of the companys stock if you use the information from the previous question? Suppose now that the company will pay 100 in dividends but for 10 years. What is the new price? What is the price of the company if this pays 100 period forever?

Previous Question:

Company ABC trades in the stock market. Its = 1. The market portfolio return is 12%. What is the expected return on companys stock?

E(R) = 12%

4. You buy an apartment for investment in a very good area so you know this will be most of the time with tenants. The monthly rent you charge to the tenants is $5,000. You set in the contract a rate of increase in the rent of 5% per year. What should be the price of the department today? Use a 10% annual discount rate.