1. Which method do you prefer for finding the intrinsic value of a stock; the dividend discount method or the CAPM? WHY?
2. Liquidity Premium Hypothesis Based on economists' forecasts and analysis, one-year Treasury bill rates and liquidity premiums for the next four years are expected to be as follows: R1 = 7.30% E(r2) = 8.40% L2 = .75% E(r3) = 8.50% L3 = .85% E(r4) = 8.80% L4 = .90% Using the liquidity premium hypothesis, what is the current rate on a four-year Treasury security?