Question 1

If this security is fairly priced in today's market, what can you tell about the YTM?

Check all that apply:

3.6% > YTM > 2.8%

YTM is the arithmetic average of 1-yr and 2-yr Treasury spot rates

YTM is the arithmetic average of 1-yr, 2-yr and 3-yr Treasury spot rates

YTM is the complex average of 1-yr and 2-yr Treasury spot rates

YTM is the complex average of 1-yr, 2-yr and 3-yr Treasury spot rates

YTM < 1.5%

2.8% > YTM > 1.5%

YTM > 3.6%

Question 2

A stock is expected to pay its first annual dividend in 5 years. The dividend is expected to be constant at $1.4 per year and for 22 years. The company will stop paying dividend after that. The required rate of return is 12%.

Part1

What should be the stock price now?