Optional Extra Credit Due Date: 4/25/2016 Rule: Complete the following 4 problems and each one is worth 50 points. The adjusted points will be the average of your extra credit and your original total scores if any improvement score exists. 1. Suppose you purchase 2,000 shares of a closed-end mutual fund at its initial public offering; the offer price is $15 per share. The offering prospectus discloses that the fund promoter gets a 7.5 percent fee from the offering. If this fund sells at a 5 per cent discount to NAV the day after the initial public offering, what is the value of your investment? 2. Suppose the following three defense stocks are to be combined into a stock index in January 2013 (perhaps a portfolio manager believes these stocks are an appropriate benchmark for his or her performance): a. Calculate the initial value of the index if a price-weighting scheme is used. b. What is the rate of return on this index for the year ending December 31, 2013? For the year ending December 31, 2015? 3. The dividend for Douglas, Inc., is currently $1.25 per share. It is expected to grow at 20 percent next year and then decline linearly to a 5 percent perpetual rate beginning in four years. If you require a 16 percent return on the stock, what is the most you would pay per share? 4. Mid-American stock has a sustainable growth rate of 8 percent, ROE of 15 percent, and dividends per share of $1.65. If the P/E ratio is 20, what is the value of a share of stock?