Computer stocks currently provide an expected rate of return of 22%. MBI, a large computer company, will pay a year-end dividend of $3.10 per share. a. If the stock is selling at $61 per share, what must be the market's expectation of the dividend growth rate? (Round your answer to 2 decimal places.)

b. If dividend growth forecasts for MBI are revised downward to 10% per year, what will happen to the price of MBI stock?

• The price will rise.

• The price will fall.

c. What (qualitatively) will happen to the company's priceearnings ratio?

• The priceearnings ratio will fall.

• The priceearnings ratio will rise.