1. Synovec Co. is growing quickly. Dividends are expected to grow at a rate of 4.69 percent for the next three years, with the growth rate falling off to a constant 5.06 percent thereafter. If the required return is 8.13 percent and the company just paid a dividend of $6.2, what is the current share price?
2. Suppose you purchase a call option to buy IBM common stock at $50 per share in September. The current price of IBM is $37 and the option premium is $10. What is the intrinsic value of this option? As the expiration date on the option approaches, what will happen to the size of the option premium?