Question 1

According to the Dividend Discount Model, which of the following is NOT an appropriate expression of P3, the value of a stock at the end-of-year 3?

Select one:

a.P3= D1/(1+R) +D2/(1+R)2+D3/(1+R)3

b.P3= D4/(1+R) +D5/(1+R)2+(P6+D6)/(1+R)3

c.P3= (D4+P4)/(1+R)

d.P3= D4/(1+R) +D5/(1+R)2+....+(PN+DN)/(1+R)N

Question2

An analyst made forecasts of Stock A' dividend payment and price for next three years as:

D1= $1, D2=$1.2, D3=$1.44 ; P1=$26.35, P2=$27.26, P3=$28.

The required return for the stock is 8%. What is the intrinsic value of the stock today (P0)?

Select one:

a.$26.14

b.$25.32

c.$25.91

Question3

You purchased 100 shares of Stock X at $25 per share last year, and received $2 dividend per share and sold the stock today for $28 per share.

What is your one year HPR?

Select one:

a.15%

b.20%

c.21%