A. (1) What are the benefits and limitations of the Gordon growth model?

(2) According to the Gordon growth model, what is an investor's valuation of a stock whose current dividend is $1.00 per year if dividends are expected to grow at a constant rate of 10 percent over a long period of time and the investor's required return is 11 percent?

B. (1) What is the Price Earnings (P/E) ratio and when is it useful?

(2) Multinational Corporation Widget Inc., a technology company, currently has a P/E ratio of 80.10, compared to the current technology P/E sector average of 25. What is the interpretation of Widget Inc.s P/E ratio?

C. A recent news headline on October 26, 2020 from the Financial Times reads US and European stocks slide on worsening Covid outbreaks. Why is this decline of stock market performance newsworthy? Discuss the possible implications of this news for individual investors and businesses.

D. Explain how portfolio diversification can be achieved in the stock market. Provide an example in your discussion.