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1. An investor expects earnings from a stock to grow at a constant rate of 3% over time and the investors' rate of discount is constant at 4%. If earnings last year were $152, then the fundamental value of the stock would be

a. $15,656.

b. $1,520.

c. $12,477

d. $152.

e. $190.

2. Suppose the spot and six-month forward rates on the Norwegian krone are Kr 5.86 and Kr 6.01, respectively. The annual risk-free rate in the United States is 3.66 percent, and the annual risk-free rate in Norway is 5.36 percent.

Using the approximation, the six-month forward rate on the Norwegian krone would have to be Kr/$ ________ to prevent arbitrage. (Do not round intermediate calculations. Round your answer to 4 decimal places, e.g., 32.1616)

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Financial Management, Finance

Category:- Financial Management
Reference No.:- M93061398

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