Response to the following questions:
1. Ross purchased 100 shares of stock for $30 a share on January 1, 1996. On December 31, 2001, he sold these shares for $25 per share. What was the yield on his investment?
2. The Babson Software Company common stock currently pays dividends of $2.00 per share. Babson's stock earnings are expected to grow at a rate of 10% for the next three years and then grow at a rate of 5% thereafter. Investors demand a return of 12% on Babson's stock. Using the dividend valuation model, what is the value of Babson common stock?