1. We are asked

(a) Suppose that the controlling stock of IBM Corporation was placed in a perpetual trust with an irrevocable clause that cash or liquidating dividends would never be paid outof this trust. Earnings per share continued to grow. What would be the value of thecompany to the stockholders? Why? (b)Why is the growth rate in earnings and dividends of a company likely to taper off in thefuture? Could the growth rate increase as well? If it did, what would be the effect on stock price? (C)Why do bonds with long maturities fluctuate more in price than do bonds with short maturities, given the same change in yield to maturity?