Camdens Antiques, Inc. just added a whole new line of furniture to his product line. Camden expects this addition to result in record high dividends of $3.15 and $4.15 in the next two years. After that, he thinks his growth will level off at its usual 3% rate. The rate expected in the marketplace for investments similar to Camdens is 5%.

What is the current value of a share of Camdens?

What will the value of a share be in year two (P2)?

What will the value of a share be in year thirteen (P13)?

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Max is thinking about buying a $1,000 bond that has a 5% semiannual coupon and 12 years to maturity. The expected rate in the marketplace for investments similar to this is 7.5%.

Will this bond be a premium or discount bond? __________________

What is the present value of the coupon stream? ________________

What is the present value of the face value? ____________________

What is the total value of the bond? ___________________________

If the bond is priced at 98, should Max buy or not buy? ___________