1. Why is the T-bills return independent of the state of the economy? Do T-bills promise a completely risk-free return? Explain.
2. The preferred stock of Dragons Inc. pays a $3 dividend. What is the value of the stock if your required rate of return is 10%?
3. Mosser Corporation, Inc. paid a $4 dividend last year. At a constant growth rate of 6%, what is the value of common stock if the investors require a 10% rate of return?