Which of the following letter choices are the answers?

The constant dividend growth model:

I. Assumes that dividends increase at a constant rate forever.

II. Can be used to compute a stock price at any point of time.

III. States that the market price of a stock is only affected by the amount of the dividend.

IV. Considers capital gains but ignores the dividend yield.

Select one:

a. I

b. II

c. III and IV

d. I and II

e. I, II, and II

Fred Flintlock wants to earn a total of 10% on his investments. He recently purchased shares of ABC stock at a price of $20 a share. The stock pays a $1 a year dividend. The price of ABC stock needs to _____ if Fred is to achieve his 10% rate of return.

Select one:

a. Remain constant

b. Decrease by 5%

c. Increase by 5%

d. Increase by 10%

e. Increase by 15%

The common stock of Eddie's Engines, Inc. sells for $25.71 a share. The stock is expected to pay $1.80 per share next month when the annual dividend is distributed. Eddie's has established a pattern of increasing its dividends by 4% annually and expects to continue doing so. What is the market rate of return on this stock?

Select one:

a. 7%

b. 9%

c. 11%

d. 13%

e. 15%