a) E Mobile Ltd. is experiencing a period of rapid growth. Earnings and dividends are expected to grow at a rate of 15% during the next 2 years, at 13% in the third year, and at a constant rate of 6% thereafter. Snyders last dividend was $1.15, and the required rate of return on the stock is 12%. Calculate the value of the stock today.

b) Chopper Internationals bond has a 12.80% coupon and a maturity value of $1,000. The bonds, which pay interest semi-annually, will mature in 25 years. If you require a pre-tax return of 15.5% on bonds of this risk, how much would you pay for one of these bonds after 6 years?

c) You have estimated the following probability distributions of expected future returns for Stocks X and Y. Stock Y expected return is 14.9%; standard deviation is 12.14% and Coefficient of variation is 0.49. Stock X Stock Y Probability Return Probability Return 0.1 -25% 0.2 3% 0.2 -10% 0.2 9% 0.4 10% 0.3 13% 0.2 25% 0.2 23% 0.1 45% 0.1 40%

i. What is the expected rate of return for Stock X?

ii. What is the standard deviation of expected returns for Stock X

iii. Which stock would you consider to be riskier? Why?