# Question

Consider the two-period model. Assume the same information as Problem 2, except that after 10 years, growth would change to 5%. What is the implied price?

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

Derive a three-period valuation model where the transitional period was N2 years and involved a linear change from the first growth rate to a steady state growth rate. Assume a bond with cash flows of $100 each year and a principal payment of $1,000 in five years and a current price of $960. What is A. Its current yield? B. Its yield to maturity? Assume liabilities of $250, $500, and $550 must be met in periods 1, 2, and 3, respectively. Find a portfolio of the bonds shown below that meets these cash outflows. What is the cost of the portfolio? Assume that General Mills, a user of wheat, and wheat farmers have the same distributional assumptions about future wheat prices. Does a futures contract make economic sense from both points of view? If yes, why? Assume that the zero-beta form of the capital asset pricing model (CAPM) is appropriate. What is the differential return for the funds shown in Problem 1 if Rz = 4%? In Problem 1Post your question

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