1. The impact from rapid dividend growth on a stock's current price will be:
a. negative, since the company is paying out profits to stockholders.
b. positive since rapid dividend growth causes stockholders to expect higher future dividends.
c. zero; only current dividends are used to determine the current price of a stock.
d. positive, but only if the corporation does not have any debt.
2. The current spot rate is $.58/SF. The 6-month forward rate is $.63/SF. A call option that expires in 6-months on 100,000 SF with a strike price of $.60/SF is selling for $1,900. A put option that expires in 6-months on 100,000 SF with a strike price of $.60/SF is selling for $600. Six months from now, the spot rate will be $.62/SF (this information is unknown right now, but I’m telling you). If you entered into a contract to sell 100,000 SF in the forward contract, how much would you have made (lost)?
a. Lost $1,900
b. Lost $600
c. Made $1,000
d. Made $2,000