1. Burkhardt Corp. pays a constant $14.80 dividend on its stock. The company will maintain this dividend for the next seven years and will then cease paying dividends forever.
If the required return on this stock is 12 percent, what is the current share price?
2. A stock priced at 50 can go up or down by 10 percent over two periods. The risk-free rate is 4 percent. Which of the following is the correct price of an American put with an exercise price of 55??