7. A stock pays no dividends for 5 years, then pays a $1.25 dividend.After that, the dividends grow at a constant rate of 3.5% forever.The required return is 10%.The dividend yield in 8 years is equal to:

8 A bond has coupon rate of 4%, YTM of 6%, face value of $1000, and matures in 4 years.Find bond value, current yield, and capital gains yield each year for this bond (you may copy and paste a table from Excel if you like).Describe what is happening to this bond's value, current yield, and capital gains yield over time and why this bond behaves this way.

9. A bond has coupon rate of 7%, YTM of 4%, face value of $1000, and matures in4years.Find bond value, current yield, and capital gains yield each year for this bond (you may copy and paste a table from Excel if you like).Describe what is happening to this bond's value, current yield, and capital gains yield over time and why this bond behaves this way.

10. A company most recently paid a dividend of $1.50.The dividends will increase by 2% per year indefinitely.The required return on the stock is 14%.

Determine each of the figures below and explain how you arrived at your answers.

• Stock price today, dividend yield and capital gains yield this year.
• Stock price in 5 years, dividend yield and capital gains yield that year.

11. A company plans to pay a dividend of $2 in 3 years.After that, dividends will grow by 35% for 2 years.After that, dividends will grow by 5% indefinitely.The required return is 11%.

Determine each of the figures below and explain how you arrived at your answers.

• Stock price today, dividend yield and capital gains yield this year.
• Stock price in 4 years, dividend yield and capital gains yield that year.

Stock price in 15 years, dividend yield and capital gains yield that year