A

A stock is expected to pay a year-end dividend of $2.00, i.e., D1 = $2.00. The dividend is expected to decline at a rate of 5% a year forever (g =-5%). If the company is in equilibrium and its expected and required rate of return is 15%, which of the following statements is CORRECT? The constant growth model cannot be used because the growth rate is negative. The company's dividend yield 5 years from now is expected to be 10%. The company's expected stock price at the beginning of next year is $9.50. The company's expected capital gains yield is 5%. The company's current stock price is $20.

B

Roenfeld Corp believes the following probability distribution exists for its stock. What is the coefficient of variation on the company's stock?

State of the Economy	Probability of State Occurring	Stock's Expected Return
Boom	0.29	25%
Normal	0.50	15%
Recession	0.21	5%

		0.4447
		0.5114
		0.4891
		0.4002
		0.3335