1. John Corporation is expected to pay a dividend of $1.25 per share at the end of the year (D1 = $1.25). The stock sells for $51.50 per share, and its required rate of return is 10.5%. The dividend is expected to grow at some constant rate, g, forever. What is the equilibrium expected growth rate?

a. 8.82%

b. 8.57%

c. 9.07%

d. 8.32%

e. 8.07%

2. Despite a higher net yield, most investors in money market securities will not buy direct from the issuer. True or False?

3. Optional redemption means the purchaser of the bond has the right to retire the bond under certain conditions. True or False?