Question 8 (1 point)

Calculate the expected return on stock:

State of the economy	Probability of the state	Percentage returns on stock
Economic recession	25%	-8.5%
Boom	12%	15.6%
Steady economic growth	63%	3.4%

Round the answers to two decimal places in percentage form.

9. The Black Bear Company just paid an annual dividend of $5.98. If you expect a constant growth rate of 8% percent, and have a required rate of return of 12.65 percent, what is the current stock price according to the constant growth dividend model (Gordon model)?

10.You are considering the purchase of a share of Blue Grass, Inc. common stock. You expect to sell it at the end of one year for $87 per share. You will also receive a dividend of $5.36 per share at the end of the next year. If your required return on this stock is 7.39 percent, what is the most you would be willing to pay for Blue Grass, Inc. common stock now?