1. At the beginning of the year (2022), you had a portfolio made up of the following:

• 500 shares of Firm X
• 200 shares of Firm Y
• 30 bonds of Firm Z

For the most recently completed year (2021), Stock X paid an annual dividend of $.87 per share. Stock Y paid an annual dividend of $4.09. You expect growth of 5% each year forever for Stock X and estimate a k of 10%. You expect growth of 12% for Stock Y, but for only the next three years before then having a rate of 2% forever thereafter. The k for stock Y is 11%.

Firm Z pays a coupon rate of 6.45% on a face value of $1,000. At the beginning of the year, the bonds were yielding (YTM) 5.6% and had 15 years left until maturity. The bonds pay semi-annual coupons. ()

1. At the beginning of the year, what value would you assign to your overall portfolio? (15 pts)

2. The first quarter of 2022 was a horrible one for both bond and stock markets which made you adjust many of your estimates. Specifically:

• You now only expect growth of 4% forever for Stock X but feel the k can remain at 10%.
• You know only expect growth of 10% for the next three years on Stock Y, followed by the same rate of 2% forever after. You think the k for this one needs to increase to 12%.
• The YTM on Bonds Z have increased to 6.1%. The time to maturity is now naturally 14.75 years.

Given this and assuming (HUGE assumption) that the assets are priced based upon the fundamental models, how much less is your portfolio worth now compared to the beginning of the quarter?