1. Assume the liquidity preference hypothesis is true. If interest rates are expected to be constant, the term structure of interest rates should be:
a. Upward sloping
b. Flat
c. Downward sloping
d. a or b
e. a, or b or c
2. Your company paid a dividend of $1.50 last year. The growth rate is expected to be 4% for 1 year then 5% per year thereafter. The required rate of return on equity is 8%. What is the expected current stock price?
$33.45
$40.98
$44.49
$49.60
$52.00