Question 1 8 6 Sun and Sand (S&S) has paid a constant $1.50 per share dividend to its common stockholders for the past 25 years. S&S expects to continue this policy for the next two years, and then begin to increase the dividend at a constant rate equal to 2 percent per year. Investors require a 12 percent rate of return to purchase S&S's common stock. 1.1-What is the fair price of S&S's common stock? (Multiple growth model) 1.2-Will you buy the S&S stock if your broker tells you it has a market price of $13.92 Question 2 Use the following Table in the calculation of the following questions. Face value is $1000. Bond Coupon Time to Yield to Market Price (%) Maturity Maturity (%) (Years) A 15 5 $650 B 15 7 $590 0 9 10 $430 2.1-Calculate the duration of the bonds(A, B and C), and rank the bonds in order of descending duration. 2.2-If interest rates are expected to increase in the future, which bond would you choose and why? Question 3 The required rate of return for the security SEA is 13%. The risk-free rate is 7% and the market average return is 12%. 3.1-What is the beta of the security? Is the stock riskier or less risky than the market? Explain your answer. 3.2-SEA paid out a dividend in 2020 of LE 2. Use the constant growth model to determine the fair price of the stock the average growth rate of the dividends is 6%) Question 4 The College Copy Shop is in process of purchasing a high-tech copier. In their search, they have gathered the following information about two possible copiers A and B. (a) Compute expected rate of return for each copier. Compute variance and standard deviation of rate of return for each copier. (c) Which copier should they purchase? Why? Question 5 You have provided your friend with a service worth $8,500. Your friend offers you the following cash flow instead of paying $8,500 today. Should you accept his offer if your opportunity cost is 8 percent Year Cash Flow 1 2 3 + $4,000 3,000 2,000 1,000