Computer stocks currently provide an expected rate of return of 17%. MBI, a large computer company, will pay a year-end dividend of $2.20 per share.

If the stock is selling at $52 per share, what must be the market's expectation of the growth rate of MBI dividends?

b-1.

If dividend growth forecasts for MBI are revised downward to 7% per year, what will happen to the price of MBI stock?

	The price will fall.
	The price will rise.

b-2.

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

	The priceearnings ratio will fall.
	The priceearnings ratio will rise.