1. Biopharma made two announcements concerning its common stock today. First, the company announced that its next annual dividend has been set at $1.20 a share. Secondly, the company announced that all future dividends will increase by 7% annually. What is the maximum amount you should pay to purchase a share of Sam's stock if your goal is to earn a 15% rate of return?
$15.00
$12.00
$35.10
$22.50
$18.00
2. Since 1925, which of the following group of assets had the highest risk premium?
a. Large-company common stocks
b. Small-company common stocks
c. U.S. Treasury Bills
d. Long-term corporate bonds