Duncan recently completed ACST1001 and is hoping to apply what he has learned to start investing. Duncan is interested in a $1,000 15-year bond paying quarterly coupons with a coupon rate of 8%. The yield to maturity for such bonds is 5% p.a. compounding quarterly.

Duncan is also considering investing in shares in a new company, Greene Daeye Ltd.

e) Duncan has predicted that the first dividend will be paid will be exactly three years from today, and amount to $5. From there, Duncan believes the dividend will grow at 20% p.a. for 3 years. After that, the dividend will grow at 4% p.a. indefinitely. Based on the riskiness of this share, Duncan requires a return of 13% on his investment. Calculate the maximum price he is willing to pay for this share. (3 marks)

f) State, and then explain the key difference between bonds and shares.