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(a) You have observed the following returns on Southern company's stock over the past five years: 28.8 percent, 16.2 percent, 35.4 percent, 3.6 percent, and 22.6 percent. The average inflation rate over this period was 3.36 percent and the average T-bill rate over the period was 4.3 percent. REQUIRED: i. Calculate the average real return on the stock. ii. Calculate the average nominal risk premium on the stock. 4 marks 2 marks iii. Calculate the geometric average retum for the stock. 2 marks (b) Prepare an amortisation schedule for a three-year loan of 110,000. The interest rate is 11 percent per year, and the loan calls for equal annual payments. 6 marks (c) Explain the main differences, from a financial perspective, of sole proprietorships, partnerships and corporations. 6 marks (d) Bond A is a premium bond with a coupon rate of 9.25 percent. This bond makes annual payments, has a YTM of 7.25 percent, a par value of 1,000, and eight years to maturity. REQUIRED: i. Calculate the current yield for Bond A. 5 marks ii. If interest rates remain unchanged, what is the expected capital gains yield over the next year for Bond A? 8 4 marks (e) The next dividend payment by LoFi plc will be 3.01 per share. The dividends are anticipated to maintain a growth rate of 6.25 percent forever. Assume the stock currently sells for 49.80 per share. REQUIRED: i. What is the dividend yield? ii. What is the expected capital gains yield? 2 marks 2 marks

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