1. (3 points) Three investors have the same required return and agree on the company's growth rate. They disagree on the size of the next dividend, however. Investor A thinks it will be $2.50; Investor B thinks it will be $1.75; Investor C thinks it will be $2.65. Rank how the investors will price the stock, from highest to lowest. 2. (3 points) Three stocks, A, B and C, have the same next dividend and the same growth rate, however the required returns for each are 18%, 11% and 15%, respectively. Rank the stocks according to their prices, from lowest to highest. 3. (3 points) You are looking at three different stocks and have the same required return for each. Each stock also has the same next dividend, however their growth rates are different. Stock Z is priced at $75, Stock Y is priced at $65, and Stock X is priced at $90. Which stock has the lowest growth rate? The highest? The one in the middle? 4. (3 points) Will the prices for the following bonds be at par, a discount or a premium? Bond A: YTM = 10%; Coupon Rate = 8%; Years to maturity is 15. Bond B: YTM = 9%; Coupon Rate = 11%; Years to maturity is 15. Bond C: YTM - 12%; Coupon Rate -12%; Years to maturity is 15 5. (3 points) Three investors, B, L and T, are interested in purchasing the same bond. Bis willing to pay $1,050 for the bond, L $980 and T $1,000. Rank the three investors in terms of their yields to maturity, from largest to smallest. 6. (3 points) You own three bonds with different coupon rates. Bond Q's is 8%, R's is 10% and T's is 6%. The yield to maturity for Q increases, the yield to maturity for R decreases, and the yield to maturity for T also decreases. What happens to the price of: a Bond b. Bond R C Bond T 7. (3 points) Today the price of a bond is $950. Will the price increase or decrease if in a year the yield to maturity for the bond: a. Increases b. Decreases c. Stays the same 8. (3 points) Today the price of a bond is $1,080. Will the price increase or decrease if in a year the yield to maturity for the bond: a. Increases b. Decreases c. Stays the same 9. (6 points) Describe how the concept of expected value or return works, and provide an example (you do not need to determine the expected value or return, however)