You forecast that James Inc. will pay dividends of $4.00 one year from today, $4.00 the next and $5.00 at the end of the third year. You expect earnings per share to be $8 at the end of the third year and based on the industry average as well as your own forecasts relative to the firm, you are willing to pay 12 times earnings at that point (i.e. the P/E in year 3 is 12). How much are you willing to pay for the stock today if you require a 12% return on the investment?

A) 75.14

B) 85.66

C)109.50

D)78.65

You are buying a callable bond, $1,000 par value that currently is priced at $1025, pays a 6% annual coupon and has 20 years to maturity. The bond is callable in 4 years at a call premium of 1 years interest. The yield to maturity and the yield to call are, respectively:

A) 5.79%, 6.63%

B) 5.79%, 5.79%

C)6.63% , 6.00%

D) 6.63%, 5.79%