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Questions 29-34 are based on the following information. Your aunt, Beth, plans to invest in the common stock of Smart-Investment Corporation. Knowing that you are
Questions 29-34 are based on the following information. Your aunt, Beth, plans to invest in the common stock of Smart-Investment Corporation. Knowing that you are studying finance, she asks for your suggestion. Your calculation shows that yield on Treasury securities is 5%. You know that the S&P 500 Index's expected annual return is 16%. Aunt Beth tells you that this company just paid an annual dividend of $2. After collecting as much information about this firm as possible, you expect the firm's dividend will grow at an annual rate of 6% forever. The stock is currently being sold for $30 per share. 29. The firm's dividend of next year is expected to be a. $1.75 b. $2.12 c. $2.14 d. $2.44 30. The market risk free rate is a. 6% b. 7% c. 14% d. 5% 31. The expected return of the market portfolio is a. 6% b. 16% c. 7% d. 14% 32. What is the dividend yield on this stock? a. 6.06% b. 7.07% c. 8.08% d. 9.09% 33. What is the capital gains yield on this stock? a. 6% b. 7% c. 8% d. 9% 34. What is the required return for this stock? a. 12.06% b. 13.07% c. 12.08% d. 14.06%
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