1. Which of the following statements is true?
a. all else equal, an annuity will have a lower value if the discount rate is higher
b. all else equal, present values increase with the discount rate
c. all else equal, the greater the rate of return, the lower the future value
d. all else equal, the lower the "t", the lower the annuity value
e. none of the above
2. A firm plans to pay a dividend of $2 at the end of the year. After that, dividends are expected to grow by 4% per year indefinetly. The required return is 10%. Which of the following statements is true?
a. The dividend yield is 4% and the capital gains yield is 10%.
b. The dividend yield is 4% and the capital gains yield is 6%.
c. The dividend yield is 6% and the capital gains yield is 4%.
d. The dividend yield and capital gains yield will vary with time.
e. None of the above.