N3

1. An inverted yield curve indicates that interest rates are expected to _ in the future.
2. If a 4% tax-free interest rate is the same as a 6% taxable interest rate, the bond holder's tax rate is _
3. Using the Gordon growth model, if a stock pays a $2 dividend, dividends grow at a rate of 2% and the required return on equity investment is 6%, the stock's price is
4. Assuming that Federal Reserve monetary policy increases the dividend growth rate from 2% to 3% in problem #3 above, and the required return on equity investment falls to 5%. The new stock price would be