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Consider the following two financial assets: (i) an ordinary share that is expected to pay a dividend of 3 next year with dividend growth expected
Consider the following two financial assets: (i) an ordinary share that is expected to pay a dividend of 3 next year with dividend growth expected to be 5% per annum thereafter; (ii) a corporate bond with an annual coupon rate of 8%, par (face) value of 100, and maturity of 5 years. If the required return on similar UK equities is 8% and on similar UK bonds is 7%, calculate the value of the UK stock and the UK bond.
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