1. Dividend Initiation and Stock Value A firm does not pay a dividend. It is expected to pay its first dividend of $1.50 per share in 4 years. This dividend will grow at 14 percent indefinitely. Using a 16 percent discount rate, compute the value of this stock.

A) $48.05

B) $85.50

C) $47.22

D) $135.80

2. TIPS Capital Return Consider a 3.25% TIPS with an issue CPI reference of 188.00. At the beginning of this year, the CPI was 198.80 and was at 205.00 at the end of the year. What was the capital gain of the TIPS in dollars? (Round your answer to 2 decimal places.)

A) $32.98

B) $6.20

C) $10.80

D) $17.00