1. Investors require a return of 16.8% per year to hold a stock. The stock currently does not pay any dividends. The stock is expected to begin paying a dividend of $1.65 per share in three years. After they begin, the dividends are expected to grow forever at a constant rate of 8.0% per year. What is the stock’s intrinsic value per share?

1) $17.34

2) $13.74

3) $11.74

4) $16.05

5) $14.41

2. The risk-free interest rate is 2.3% per year, the market risk premium is 5.1% per year, and a stock’s beta is 0.85. What is the stock’s annual expected return?

1) 7.2%

2) 7.8%

3) 6.6%

4) 6.9%

5) 7.5%