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1. GE is issuing a preferred stock that has a face value of $100. The stock pays a fixed annual dividend of $5 per share. Suppose the required rate of return on the stock is 10%. How much are you willing to pay for the stock?
2. A stock you are interested in has just paid a dividend of $1. The anticipated annual growth rate in dividends is 10% forever. Your required rate of return is 12%. Calculate the expected price of the stock.