$1.$ ASSET VALUATION:

An investor has accumulated savings of $$20,000$ and decided that she will invest in one of thefollowing investment opportunities:

a$.$ Bank of Commerce bonds with a par value of $$1,000,$ a semi$-$annual coupon interestrate of $8\mathrm{.}75$ percent per annum, are selling for $$1,314$ and mature in $12$ years$$ time.

b$.$ Grand Palace Limited preferred stock paying a dividend of $$2\mathrm{.}50$ and selling for$$25\mathrm{.}50.$

c$.$ Fashion Designer Limited common stock selling for $$36\mathrm{.}75.$ The stock recently paida $$1\mathrm{.}35$ dividend and the firm's earnings per share has increased from $$1\mathrm{.}75$ to $$3\mathrm{.}25$in the past five years. The firm expects to grow at the same rate for the foreseeablefuture.

The required returns for these investments are $6\%$ for the bond, $7\%$ for the preferred stock, and$15\%$ for the common stock.

Required:

a$)$ Based on the respective required rates of returns, calculate the value of

i$.$ Bank of Commerce bonds $(8$ marks$)$ii$.$ Grand Palace Limited preferred stock $(4$ marks$)$iii$.$ Fashion Designer Limited common stock $(8$ marks$)$b$)$ Which investment should she select? Why? $(5$ marks$)($Total $25$ marks$)$