1. Using CAPM, A stock has an expected return of 14 percent, its beta is 1.45, and the expected return on the market is 11 percent. What must the risk-free rate be? (Do not round your intermediate calculations.) 4.33% -1.95% 4.12% 4.51% 4.55%
2. Calculating Cost of Equity, The Down and Out Co. just issued a dividend of $2.41 per share on its common stock. The company is expected to maintain a constant 6 percent growth rate in its dividends indefinitely. If the stock sells for $35 a share, what is the company's cost of equity? (Do not round your intermediate calculations.) 13.3% 7.47% 12.63% 12.89% 13.96%