1. If someone offered to sell you a stock that is expected to pay a dividend of $3.00 one year from now and the dividend is expected to grow by 4% per year every year thereafter, what would you pay fo the stock today if your required rate of return was 10%?
2. If someone offered to sell you a bond that matures in 20 years and will pay you $1,000 at that time, what would you pay for the bond today if your required rate of return was 7%?
3. You have decided that you want to be a millionaire by the time you are 30. You are currently 19 years old. If you can earn a return on your savings of 8% per year, how much do you have to invest each year in order to have $1,000,000 when you turn 30 years old.