1. A $1000 par-value bond, making semi-annual payments of $32 each, has a YTM of 7.3%. Which of following could be its current yield?

a. 6%

b. 7%

c. 8%

d. None of these

e. Not enough information to answer the question

2. A share of IBM is trading at $48, and will pay a dividend of $3.00 in one year. The riskfree rate is 3.0%, the expected return on the market portfolio is 11.0%, and IBM’s CAPM beta is 0.9. You expect the dividend to grow at 4.5%. Using the constant growth DDM you value the share at:

a. $47.43

b. $48.91

c. $50.39

d. $51.52

e. $52.63

3. Using the same information from Question 2. What is your expected return from buying the share today, holding for one year (collecting the dividend at year end) then selling the share, if you assume the market price will reflect your valuation by the time you sell?

a. 20.8%

b. 21.4%

c. 22.6%

d. 23.2%

e. 24.0%