Reference no: EM132491499

1) The common stock of Say Cheese, Inc. offers an expected total return of 9.2 percent. The last annual dividend was $2.10 a share. Dividends increase at a constant 2.6 percent per year.

What is the dividend yield?

2) Spring Break, Corp. currently has earnings per share (EPS) of $2 and expects this to grow at 5.6 percent per year. If the benchmark price to earnings ratio (PE) ratio is 12, what is the expected share price next year?

3) You finally found your dream home. The selling price is $640,000; you will put $64,000 down and obtain a 30 year fixed rate mortgage at 6.4% APR for the balance of the loan. Assume that monthly payments begin in one month.

a) What will each payment be?

b) Although you will get a 30 year mortgage, you plan to repay the loan by making an additional payment each month along with your regular payment. How much extra must you pay each month if you wish to pay off the loan in 20 years?

c) Your banker suggests that, rather than obtaining a 30 year mortgage and paying it off early, you should simply obtain a 15 year loan for the same amount. The rate on this loan is 4.6% APR. By how much will your monthly payment change for the 15 year loan than the regular payment on the 30 year loan? In your answer, specify whether the payment will be higher or lower and by what amount.