1. The outstanding bonds of Winter Tires Inc. provide a real rate of return of 5.6 percent. If the current rate of inflation is 4.68 percent, what is the actual nominal rate of return on these bonds? A. 8.58 percent B. 9.33 percent C. 9.76 percent D. 10.54 percent
2. Roy's Welding common stock sells for $48.96 a share and pays an annual dividend that increases by 2.5 percent annually. The market rate of return on this stock is 14.6 percent. What is the amount of this year's dividend just paid? A. $5.78 B. $5.64 C. $4.98 D. $4.80
3. Hi-Tek is a young start-up company. No dividends will be paid on the stock over the next 15 years, because the firm needs to plow back its earnings to fuel growth. The company plans to pay a $6 per share dividend in 16 years and will increase the dividend by 4 percent per year thereafter. What is the current share price if the required return on this stock is 16 percent? A. $5.62 B. $8.59 C. $5.40 D. $50.00