A US corporate bond has a coupon rate of 3%, a par (face) value of $1,000 and will mature in 3 years. The current yield on similar bonds is 2.5%.

A) Using the information given above and assuming coupons are paid semi-annually, calculate the value of the corporate bond.

B) Calculate the duration of the US corporate bond described above (assume semi-annual coupon payments).

C) Consider the following stocks:

-Stock A is expected to pay a dividend of $0 next year and then from year 2 onwards a dividend of $2.50 every year,

-Stock B is expected to pay a dividend of $1 next year, $2 in year 2, with dividend growth expected to be 3% per annum from year 2.

If the required return on similar equities is 10%, calculate the price of each stock.