1. Burke Tires just paid a dividend of D0 = $3.75. Analysts expect the company's dividend to grow by 30% this year, by 10% in Year 2, and at a constant rate of 5% in Year 3 and thereafter. The required return on this low-risk stock is 9.00%. What is the best estimate of the stock's current market value?
a. $127.80
b. $128.48
c. $128.14
d. $127.46
e. $128.82
2. A 25-year, $1,000 par value bond has an 8.5% annual coupon. The bond currently sells for $950. If the yield to maturity remains at its current rate, what will the price be 5 years from now?
a. $949.27
b. $952.11
c. $953.53
d. $950.69
e. $947.85