The following equation is the Dividend Discount Model, also known as the 'Gordon Growth Model' or the 'Perpetuity with growth' equation.

### P_{0} = \frac{C_1}{r_{\text{eff}} - g_{\text{eff}}} ###

What would you call the expression ## C_1/P_0 ##?

A stock **just paid** its annual dividend of $9. The share price is $60. The required return of the stock is 10% pa as an effective annual rate.

What is the implied growth rate of the dividend per year?

**Question 494** franking credit, personal tax on dividends, imputation tax system

A firm pays a fully franked cash dividend of $**100** to one of its Australian shareholders who has a personal marginal tax rate of **15**%. The corporate tax rate is **30**%.

What will be the shareholder's personal tax payable due to the dividend payment?

**Question 638** option, option payoff at maturity, no explanation

Which of the below formulas gives the payoff ##(f)## at maturity ##(T)## from being **long** a **put** option? Let the underlying asset price at maturity be ##S_T## and the exercise price be ##X_T##.

A stock has a beta of **1.5**. The market's expected total return is **10**% pa and the risk free rate is **5**% pa, both given as effective annual rates.

What do you think will be the stock's expected return over the next year, given as an effective annual rate?

A home loan company advertises an interest rate of **4.5**% pa, payable monthly. Which of the following statements about the interest rate is **NOT** correct?

Below is a graph of 3 peoples’ utility functions, Mr Blue (U=W^(1/2) ), Miss Red (U=W/10) and Mrs Green (U=W^2/1000). Assume that each of them currently have $50 of wealth.

Which of the following statements about them is **NOT** correct?

(a) Mr Blue would prefer to invest his wealth in a well diversified portfolio of stocks rather than a single stock, assuming that all stocks had the same total risk and return.

**Question 811** log-normal distribution, mean and median returns, return distribution, arithmetic and geometric averages

Which of the following statements about probability distributions is **NOT** correct?

**Question 823** option, option payoff at maturity, option profit, no explanation

A European **call** option should only be exercised if: