1. The shares of Dilly Dilly stock will pay a dividend of $3.00 next year. After that time, the dividend will grow at a constant rate. If investors require a return of 12%, and the current share price of Dilly Dilly is $37.50, what is the expected growth rate in dividends?
a. ____12.5%
b. ____ 4.0%
c. ____ 6.4%
d. ____ 8.0%
e. ____ 3.2%
2. You have some money to invest. You are comparing two alternatives: Account X, which earns 6% compounded annually, or Account Y, which earns 5.94% compounded semiannually. Which would you choose and why?
a. ____X because it has a higher effective annual rate.
b. ____X because it has a higher quoted rate.
c. ____Y because it has a higher effective annual rate.
d. ____Y because the future value in one year is lower.
e. ____Y because it has a higher quoted rate.