Question 2 (6 marks) After careful analysis, you have determined that a firm's dividends should grow at 2%%. on average. in the foreseeable future. The firm dividend starts at $3. The required rate of return on equity is 10%. Suppose the current price of the stock is $20.56. (a) (1 mark) Assuming nothing changes, what is the price of the stock in three years? (b) ( 1 mark) Is the stock price overpriced or underpriced? Why? (c) (2 marks) Suppose after three years, dividends grow at a slower rate but constant of 1.8% for ever. Would you expect an increase or decrease in the required return? Compute the new required return. d) (2 marks) Suppose the Fed make an open market purchase ($50 million) and First National Bank uses all proceeds from the Fed to make more loans. Draw T-account changes to First National Bank's balance sheet in three stages ie. 1" the purchase, 2nd the loan, 3" after the proceeds from the loan are spent by the borrower