1. Is the stock price based more on long-term or


Question Description:

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1. Is the stock price based more on long-term or short-term expectations? Answer this by finding the percentage of Temp Force’s current stock price based on dividends expected more than 3 years in the future. 2. Assume that Temp Force has a beta coefficient of 1 .2, that the risk-free rate (the yield on T-bonds) is 7.0%, and that the market risk premium is 5%. What is the required rate of return on the firm’s stock? Sam Strother and Shawna Tibbs are senior vice presidents of Mutual of Seattle. They are co-directors of the company’s pension fund management division, with Strother having responsibility for fixed income securities (primarily bonds) and Tibbs being responsible for equity investments. A major new client, the Northwestern Municipal League, has requested that Mutual of Seattle present an investment seminar to the mayors of the represented cities, and Strother and Tibbs, who will make the actual presentation, have asked you to help them.

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