A grandparent recently passed away and left a small inheritance for you and each of your family members. You receive a lump sum of $10,000 from the inheritance. Knowing the importance investing, you realize there are three alternatives in which you could invest your money. Show work

Option 1

oAn investment bond, which matures in 4 years, has a par value of $1000, pays 4.2% coupon, and currently sells for $1,115.

oUse 3% as your required rate of return.

Option 2

oA preferred stock, which pays a dividend of $2.63 per share, and has a share price of $26.25.

oUse a 5% required rate of return.

Option 3

oCommon stock currently priced at $60, and paying $1.88 dividend.

oEarnings per share have grown from $2.27 to $3.78 in the past 5 years, and is expected to grow at this identical rate for the near future.

oUse 12% as your required rate of return.