1. Primary dealers believe inflation will average 5% over the next ten years. They are looking for a real rate of 2% per year. If the Treasury auctions a 6% coupon bond, will the bond trade at a premium, discount or par?
2. Expected Return Circuit City Stores (CC) recently paid a $.35 dividend. The dividend is expected to grow at a 24.90 percent rate. At the current stock price of $9.86, what is the return shareholders are expecting?