Emmie is considering buying a stock and holding it for 1 year. She expects the stock to pay a dividend of $10.00 per share and the price of the stock to be $345.00 1 year from today. Based on the risk level of the stock, Emmie requires a rate of return of 7% on this investment. What is the most she should be willing to pay per share?

Sattie is considering buying a stock and holding it for 2 years. She expects the stock to pay a dividend of $7.00 per share in year 1, and $8.00 in year 2, and the price of the stock to be $275 one year from now, and $305 2 years from now. Based on the risk level of the stock, Emmie requires a rate of return of 11% on this investment. What is the most she should be willing to pay per share?

Birdie is considering buying Restaurant of America preferred stock. The preferred stock has no maturity date and pays the same dividend of $24 per share each year. Birdie requires a rate of return of 10% on this asset. If the current market price of the preferred shares is $220, should she buy it? Why or why not?

Birdie is considering buying Mature Company Inc. Mature Company recently paid a dividend of $7.00 per share and expects to grow the dividend by 3% each year over the very long term. If Birdie requires a 6% rate of return on this investment, what is the most she should be willing to pay for it?

5. Len uses Yahoo! Finance and finds the following information:
   • The 30-year US Treasury bond is yielding 1.90%.
   • The beta of stock KB is 1.10.
   • The expected return on the overall market portfolio is 8.90%.

Using CAPM, what is the expected return on KBs stock?