Consider time 0, 1, and 2. A dividend is paid at time 1. The ex-dividend date = dividend payment date. For individual shareholders, the personal tax rate on dividend is 40% and that on capital gains is 15%. For institutional shareholders, the personal tax rate on dividend is 2% and that on capital gains is 50%. The after-tax expected return on equity is 20% between time 0 and time 1, and 10% between time 1+ and time 2. The stock price is worth 1000 at time 0. The stock price is expected to be worth 1200 at time 2. Remark: The notation t+ stands for time t right after cash-flows have been paid. Place yourself at time 1+. 1) What is the (expected) price of the stock at time 1+ when all shareholders are individuals (P (1+))? Remark: This price is the so-called er-dividend price. 2) What is the (expected) price of the stock at time 1+ when all shareholders are institutions (P;(1+))? Remark: This price is the so-called er-dividend price. 3) Compute the before-tax expected return on the stock between time 1+ and time 2 when all sharcholders are individuals (rs,(1+)). 4) Compute the before-tax expected return on the stock between time 1+ and time 2 when all shareholders are institutions (rs./(1+)). Place yourself at time 0. 5) Compute the dividend paid at time 1 when all shareholders are individuals (D;(1)). 6) Compute the dividend paid at time 1 when all shareholders are institutions (D;(1)). 7) What is the (expected) price of the stock, at time 1, right before the dividend is paid when all shareholders are individuals (Pf(1))? Remark: This price is the so-called cum-dividend price. 8) What is the (expected) price of the stock, at time 1, right before the dividend is paid when all sharcholders are institutions (P(1))? Remark: This price is the so-called cum-dividend price.