Question 1: What is the rate of return for an investor who pays $1,054.47 for a three-year bond with a 7% coupon and sells the bond one year later for $1,037.19?
A) 5.00%
B) 5.33%
C) 6.46%
D) 7.00%
Question 2: What price would you expect to pay for a stock with 13% required rate of return, 4% rate of dividend growth, and an annual dividend of $2.50 which will be paid tomorrow?
A) $27.78
B) $30.28
C) $31.10
D) $31.39
Question 3: What is the required return for a stock that has a 5% constant growth rate, a price of $25, an expected dividend of $2, and a P/E ratio of 10?
A) 5%
B) 10%
C) 13%
D) 22%