The last dividend (Div0) is 1.80, the growth rate (g) is 6, and ...

[NguyenJ]

The last dividend (Div0) is 1.80, the growth rate (g) is 6, and the required rate of return (r) is 12. What is the stock price according to the constant growth dividend model?
 
  A) 31.80
  B) 30.80
  C) 30.00
  D) 15.00

Question 2

Your friend tells you that ABC Mutual Fund can beat the market return and has less risk than the market. Is this possible?
 
  A) In the short-run, yes. In the long-run, no.
  B) In the short-run, yes. In the long-run, yes.
  C) In the short-run, no. In the long-run, no.
  D) In the short-run, no. In the long-run, yes.

[karmakat49]

Answer to Question 1

Answer: A
Explanation: A) The Dividend Growth Model states that P0 = .
Inserting our values gives: P0 = = = = 31.80.

Answer to Question 2

A

[NguyenJ]

Gracias!

[upturnedfurball]

Excellent