1. Sorenson Corp.’s expected year-end dividend is D1 = $4.00, its required return is rS = 11.00%, its dividend yield is 6.00%, and its growth rate is expected to be constant in the future. What is Sorenson's expected stock price in 7 years, i.e., what is ?

$85.36

$90.05

$87.24

$76.92

$93.81

2. Company A has a beta of 0.70, while Company B's beta is 1.45. The required return on the stock market is 9.00%, and the risk-free rate is 2.25%. What is the difference between A's and B's required rates of return? (Hint: First find the market risk premium, then find the required returns on the stocks.) Do not round your intermediate calculations.

4.30%

5.01%

5.06%

4.71%

4.25%