1. Jerilu Markets has a beta of 1.09. The risk-free rate of return is 2.75 percent and the market rate of return is 9.80 percent. What is the risk premium on this stock?
2. The Up and Coming Corporation's common stock has a beta of 1.1. If the risk-free rate is 3 percent and the expected return on the market is 13 percent, what is the company's cost of equity capital? (Do not round your intermediate calculations.)
3. Rapid City Motors Co. expects to grow at 20% for two years. After that it expects 8% growth indefinitely. The firm recently declared a $4.00 annual dividend. Similar stocks return about 12%. How much should a share of Rapid City be worth today?