# Question: Assume the information in Problem 2 and a price of

Assume the information in Problem 2 and a price of $60. Furthermore, assume that the stockholder was most unsure concerning the return on new investment. How much would return have to change before the security was fairly priced?

In Problem 2

Assume the next period's dividend is $1, that stockholders require a 12% return, that new investment is expected to yield 14%, and that the retention rate is 50%.

In Problem 2

Assume the next period's dividend is $1, that stockholders require a 12% return, that new investment is expected to yield 14%, and that the retention rate is 50%.

## Answer to relevant Questions

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