Question: 2. Write down the equation for the stock price. Use this equation to answer the following: (a) Your stock broker calls to tell you she

 2. Write down the equation for the stock price. Use this

2. Write down the equation for the stock price. Use this equation to answer the following: (a) Your stock broker calls to tell you she has a great deal on a stock. She gives you the following information: the real interest rate is 4 percent, the capital gain on this stock is 3.5 percent, and it pays $2.5 in dividends. How much should you pay for this stock? b) The next day she calls back and tells you about another stock that is for sale (i.e., the market price) for S75. She does not know the dividend growth but she does know the dividend payment, $0.35 per share, and the real interest rate, 4 percent. For you to buy this stock, how much annual dividend growth should you expect at that price? (c) A hot stock tip comes from a friend. The price of the stock is $50, the dividend gain is 2.5 percent, and you know the real interest rate from your previous two discussions with your broker. how much of a dividend payment will you want

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