a. Lou Douglas bought a stock 5 years ago for $20 a share. During the last five years the dividend has gone from $0.50 a share to $1.20 a share. Calculate the annual compounded growth rate.

b. A bond just purchased pays annual interest of 10 percent. In seven years, it matures at its face value of $25,000. Calculate the maximum price you would pay for the bond, if the current market yield for a bond of similar risk is 8.5 percent.

c. Current yields are 10 percent on a preferred share that pay a perpetual dividend of $5 per share. Calculate the maximum price you would pay for the preferred stock.

d. What would the maximum price paid for a share of common stock that has just paid a dividend of $2.00, is expecting an indefinite growth rate of 6 percent and requires a return of 16 percent on the basis of perceived market risk?

e. Alberta Petroleum has preferred stock outstanding that pays a $8 dividend. The stock is now selling for $75. Calculate the current yield (return) on the preferred stock.

f. Triple peaks will pay a $1.90 dividend at the end of year one. The dividend is expected to grow at a constant growth rate of 8 percent. Triple peaks currently have a share price of $40. Given that you purchased the common share for $40 a share, calculate the required return (discount rate)

g. Indicate whether each of the following changes would make the required rate of return (discount rate) go up or down or remain unchanged. Provide a short explanation as to why the required rate of return would go up or down or remain unchanged.

1. The dividend payment increases.
2. The expected growth rate increases.
3. The stock price increases.