1. A common stock is selling for $50. The dividend paid next year will be $4.40 assuming a constant growth rate of 6.7%. What is the capital gains yield?
a. 3.4%
b. 6.7%
c. 4.5%
d. 8.8%
2. Stock A has a beta of 1.2 and an expected return of 11.4%. Stock B has a beta of 0.80 and an expected return of 8.06%. The market risk premium is 7.2%. What would the risk-free rate have to be for the two stocks to be correctly priced relative to each other?
a. 8.47%
b. 12.04%
c. 1.38%
d. 3.24%
3. Merton Enterprise has bonds with face value of $1,000 on the market making annual payments, with 8 years to maturity, and selling for $948. At this price, the bonds yield 5.9%. What is the coupon rate on Merton's bonds?
a. 7.18%
b. 5.07%
c. 9.36%
d. 8.29%