5. Fools Gold Mining Company is expected to pay a dividend of $8 in the upcoming year.

Dividends are expected to decline at the rate of 2% per year. The risk-free rate of return is 6%

and the expected return on the market portfolio is 14%. The stock of Fools Gold Mining

Company has a beta of 0.25. The return you should require on the stock is _______.

A. 2%

B. 4%

C. 6%

D. 8%

E. None of these is correct

6. In the dividend discount model, which of the following are not incorporated into the discount

rate?

A. Real risk-free rate

B. Risk premium for stocks

C. Return on assets

D. Expected inflation rate

E. None of these is correct