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David has one share of stock and one bond. The total value of the two securities is $ 1 , 0 5 1 . 8

David has one share of stock and one bond. The total value of the two securities is $1,051.80. The bond has a YTM of 12.75 percent, a coupon rate of 8.06 percent, and a face value of $1,000.00; pays semi-annual coupons with the next one expected in 6 months, and matures in 3 years. The stock pays annual dividends that are expected to grow by 4.34 percent per year forever. The next dividend is expected to be $12.45 and paid in one year. What is the expected return for the stock?
5.09%(plus or minus 0.03 percentage points)
7.51%(plus or minus 0.03 percentage points)
28.37%(plus or minus 0.03 percentage points)
11.85%(plus or minus 0.03 percentage points)
None of the above is within 0.03 percentage points of the correct answer
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