a) Infinitiv Inc. has just set up a fund to provide scholarships for needy students that will cost a total of $1,000,000 per year forever. The fund is expected to earn a yearly return of 10 percent. How much must be deposited today to fund the scholarship under the following conditions?

i) If the (scholarship) payments begin in one year.

ii) If the (scholarship) payments begin today.

b) Frodo plans to go on a round-the-world cruise 3 years from now. To achieve the goal, Frodo will be depositing $8,000 into a bank account every two months. The first deposit will be made six months from today and the last deposit 30 months from now. The account pays a 2-month interest rate of 2%.

i) How much at most can Frodo spend on the cruise three years from now?

ii) How much does Frodo need to have today in order to pay for the cruise?

c) Last year Tracy bought a semi-annual coupon bond that pays 8% interest with $1,000 face value and 5 years to maturity.

i) If the yield of the bond was 4% every six months, what was its purchase price?

ii) One year later (today), the bond's semi-annual yield has gone down to 3% and Tracy sold it immediately after receiving the coupon. Compute 1) the current yield 2) the capital gains yield

d) DarkBi Co. Ltd. has just paid $5 cash dividend per share last year. Investment analysts expect that its dividend will grow at 5% in year 1, 8% in year 2, and 6% per year thereafter. Assume the yearly required rate of return of DarkBis common share is 14%, determine the per share value of DarkBi.

e) You are considering investing in the following two stocks. The risk-free rate is 7 percent and the market risk premium is 8 percent.

stock	price today	expected price in 1 year	expected divided in 1 year	beta
x	$20	$22	$2	1.0
y	$30	$32	$1.78	0.9

i) Compute the 1-year expected and required return on each stock. [Hint: Return is made up of dividend payments and capital gains/loss.]

ii) Which asset is worth investing? Support your answer with calculations.