1. Creative Financing Inc., is planning to offer a $1,000 par value 15-year maturity bond with a coupon rate that changes every 5 years. The coupon rate for the first 5 years is 10 percent, 10.75 percent for the next 5 years, and 11.5 percent for the final 5 years. If you require an 11 percent rate of return on a bond of this quality and maturity, what is the maximum price you would pay for the bond? (Assume semi-annual interest payments.)

2. Jacket Wear Industries has been going through a period of extraordinary growth. Earnings per share have grown at a 20 percent annual growth rate over the past 10 years. The current dividend rate is $2 per share. Current earnings are $3.25 per share. Earnings are expected to grow at an annual rate of 15 percent for the next 3 three years and 6 percent per annum thereafter. Dividends are expected to grow by 25 percent during the coming year, by 15 percent per annum for the following two years, and by 6 percent per annum thereafter. What price do you expect the stock to sell for at the beginning of year 2?