8. You are an investor that wants to buy 1 share of "ABC" Corporation's stock. You expect to sell the stock at the end of year 3 for a price of $60. In the first year you are expected to receive a dividend of $4 per share. The dividend payment is expected to grow by a rate of 3% every year. If the equity cost of capital is 6% which of the following correctly describes how much you would be willing to pay for one share of ABC Corpotation's stock? (a) Po = (1+0.06 + (1+6:00) + (T+0.00* + 1+0:06) (b) Po = (1+0.06 + +0.065* + (1+0.00;* + 10.00 -0,03)* (e) Po = (1+0.06 + 470885* + (1+2.00 + (0.06 -0.03) (d) P = (10.06+ (1+0.66)* + 140.00* + (1+0.08) (e) None of the above is correct. Bond A and Bond B both have a yield-to-maturity of 5% and a coupon rate of 4%. Bond A has a maturity of 15 years, whereas Bond B has a maturity of 20 years. Which of these two bonds is exposed to greater interest rate risk? (a) Bond A (b) Bond B (c) They are exposed to the same interest rate risk as they have the same yield-to-maturity and coupon rate (d) None of the above 10. What is the difference between an Annual Percentage Rate (APR) and an Effective Annual Rate (EAR) (1) APR takes into account the effects of compounding whereas EAR does not. (b) EAR takes into account the effects of compounding whereas APR does not (c) APR will generally be higher than EAR (a) both a) and c)