1. Suppose you're given with the following information for some assets; a 10-year 2.0%-coupon bond of semi-annualcoupon payment with face value as $1,000, a common stock of $3.60 expected dividend with 2.5% growth rate currently. Both bond and common stock are issued by Company M&M. Answer the following questions.
a) Suppose the stock price is $22.32 per share right now, and assuming the capital market is efficient, what is the required rate of return (discount rate) for the stock? What are the assumptions you have for this present value model?
1) 16.73%
2) 12.64%
3) 9.87%
4) 15.84%
5) about 5%