1. A stock paid $3.85 in dividends at the end of last year and is expected to pay a cash dividend until infinity. No growth is expected. Investors require a 6% rate of return. What is the value of the common stock?
A $3.85
B. $68.02
C. $64.17
D. $6.42
2. Which of the followin is NOT a reason why the required return on a bond may differ form its par value?
A. The required rate of return is less than the coupon value, so the bond sells at a premium.
B. The required rate of return is exceeds the coupon value, so the bond sells below par value.
C. The required rate of return exceeds the coupon value, so the bonds sells at a premium
D. The required rate of return is less than the coupon value, so the bond sells at above par value