1. Based on the following information, what is the price at time 1 expected by investors for IWV stock? Assume that the stock is priced in equilibrium.
RF=.04
RM-RF=.08
Beta for the stock=1.5
E(D1)=$4
P0=$40
2. Tell Me Why Co. is expected to maintain a constant 6 percent growth rate in its dividends indefinitely. If the company has a dividend yield of 7.8 percent, what is the required return on the company’s stock? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places, e.g., 32.16.)
Required return %