1. A company expects to pay a dividend of $3.50 per share one year from today. The dividend is expected to grow at 25 percent per year for two years. Thereafter, the dividend will grow at 4 percent per year in perpetuity. If the appropriate discount rate is equal to 12 percent, what is the price of the company's stock today?
A. $67 B. $57 C. $61 D. $64
2. In a given portfolio, replacing an existing investment with a lower beta investment results in _____.?
a. ?an increase in the systematic risk of the portfolio
b. ?a decrease in the required rate of return of the portfolio
c. ?an increase in the expected rate of rate return of the portfolio
d. ?the portfolio beta moving toward 1.0
e. ?a decrease in the actual rate of return of the portfolio