1. You are planning to purchase a stock today that you want to hold for 3 years. You predict that at the end of each year, the stock will pay $10 in dividends. You also predict that you can resell the stock for $200 a share in 3 years. If you require a 16% annual return on your investment, what is the maximum you'd pay for each share of stock today?
2. You buy a bond (which does not pay any coupons) for $950 today. In 10 years, the bond will mature and pay its face value of $1000. What is your annual yield?