Consider the following three stocks: A. Stock A is expected to provide an annual dividend of 8 a share forever. B. Stock B is expected to pay a dividend of 5 next year. Thereafter, dividend growth is expected to be 4% a year forever. C. Stock C is expected to pay a dividend of 6 next year. Thereafter, dividend growth is expected to be 12% percent a year for 4 years and zero thereafter. a) If the cost of capital for all 3 companies is 10%, which stock is the most valuable? [12 marks] A: 80 B: 83.33 C: 81.04 b) DMM Ltd. has just issued a five-year, annual-paid corporate bond. The bond has a face value of 1,000 and a 3.0% annual coupon rate. If the yield to maturity on the bond is 5.7% per annum, the price of the bond is closest to: (5 marks] 885.33 c) If the standard deviation of the return of stock C is 12.4% per annum and the expected stock return is equal to the cost of capital. What is the portfolio return and standard deviation if you invest in ten shares of stock C and one DMM bond as in (b), assuming the correlation coefficient between the two assets is -0.16 and the standard deviation of the bond is 3.8%? [8 marks] Portfolio return = 7.76% Standard Deviation = 5.963% d) What is the return and standard deviation of a new portfolio, consisting of an equal investment in the portfolio in (c) and a risk-free asset with a return of 2.5%? (5 marks] ONLY ANSWER D, I HAVE INCLUDED THE ANSWERS TO A,B,C SO THAT YOU CAN DO D