Ftephanie Carter has been gifted a sum of $50,000 by her grandparents on completing her graduation successfilly. She is a fresh finance graduate and is excited to invest some money in the capital market, for which she intends to use the gifted sum of $50,000. However instead of committing thismoney to the market immediately, she decides to wait for some time, work in the field and acquire some experience before proceeding with her intended investment. She thus contemplates an extremely conservative investment in a porffolio of stocks and bonds, at the start of year 5 from now. For now, she will leave the $50,000 in a fixed deposit with the bank which promises an interestrate of 6% per annum. She will require a retum of at least 9% on her stock investments and 4% on bond investments. Stephanie would have to pay 25% taxes on any interest income. Dividends will be tax-free. Stephanie's research has al owed her to narrow down on the following investment candidates: Stocks: 1. Pan-Elixir Ltd is a pharmaceutical company. Its stock is faily priced. Last year (t=0), itpaid a dividend of $2.50 per share to its shareholders. The company management has estimated that it will be able to maintain a constant growth rate in dividends of 3% per annum. 2. Rebound Toursm Inc is a travel planningestablishment. Its shares sold for an average price of $40 per share last year (t=0) and themanagement estimatesto maintain a constant growth rate in dividends. Last year, itpaid a dividend of $0.50 per share to its shareholders. 3. Cheers Inc is a beverage producer. It pays a dividend of $1 per share to its shareholders, which is likely to remain constant over an indefinite time period. 4. Think-Local Inc paid $0.75 per share as dividendlast year (t=0 ). The company expects that it will take next 2 years (illl t=2 ) to recover from thepandemic's effects, duning which time, its dividend will grow at a rate of 1.5% per annum From year 3 onwards, the dividend growth rate is expected to settle at 2% per year indefinitely. Bonds: 1. Pleasant InnovationsLtd. had issued a series of 20 -year bonds at 98% of face value (assume face value = $100 ). These bonds come with a coupon rate of 3% and will be paid semi-annually. By the start of year 5 from now, 5 years would have passed. Assume that the YTM remains constant over time. 2. D Right Side Inc. will offer a coupon of 4% per annumon itsmuch awaited 20 -year bonds. By the start of year 5 from now, these bonds would be 2 years old and would likely sell for a price of $70 per bond (f.u value =$100 ). Coupons would be paid annually. Assume that the YTM . 11.1 lain constant over time. 3. Tried and tested Ltd. has bond issue with an after-tax YTMof 6%.5 years from now they have 25 years left Stephanie Carter has been gifted a sum of $50,000 by her grandparents on completing her graduation successfilly. She is a fresh finance graduate and is excited to invest some money in the capital market, for which she intends to use the gifted sum of $50,000. However instead of committing thismoney to the market immediately, she decides to wait for some time, work in the field and acquire some experience before proceeding with her intended investment. She thus contemplates an extremely conservative investment in a potfolio of stocks and bonds, at the start of year 5 from now. For now, she will leave the $50,000 in a fixed deposit with the bank which promises an interestrate of 6% per annum. She will require a retum of at least 9% on her stock investments and 4% on bond investments. Stephanie would haveto pay 25% taxes on any interest income. Dividends will be tax-free. Stephanie's research has al owed her to narrow down on the following investment candidates: Stocks: 1. Pan-Elixir Ltd is a pharmaceutical company. Its stock is faily priced Last year (t=0), itpaid a dividend of $2.50 per share to its shareholders. The company management has estimated that it will be able to maintain a constant growth rate in dividends of 3% per annum. 2. Rebound Tounism Inc is a travel planningestablishment. Its shares sold for an average price of $40 per share last year (t=0) and themanagement estimatesto maintain a constant growth rate in dividends. Last year, itpaid a dividend of $0.50 per share to its shareholders. 3. Cheers Inc is a beverage producer. It pays a dividend of $1 per share to its shareholders, which is likely to remain constant over an indefinite time period. 4. Think-Local Inc paid $0.75 per share as dividendlast year (t=0). The company expects that it will take next 2 years (iill t=2 ) to recover from the pandemic's seffects, dunin swhich fime, its dividend will grow at a rate of 1.5% per annum From year 3 onwards, the dividend growth rate is expected to settle at 2% per year indefinitely. Bonds: 1. Pleasant InnovationsLtd. had issued a series of 20 -year bonds at 98% of face value (assume face value = $100 ). These bonds come with a coupon rate of 3% and will be paid semi-anmauy. By the start of year 5 1. Pleasant InnovationsLtd. had issued a series of 20 -year bonds at 98% of face value (assume face value = $100 ). These bonds come with a coupon rate of 3% and will be paid semi-annually. By the start of year 5 from now 5 years would have passed. Assume that the YTM remains constant over time. 2. D Right Side Inc will offer a coupon of 4% per annumon its much awaited 20 -year bonds. By the start of year 5 from now, these bonds would be 2 years old and would likely sell far a price of $70 per bond (face value =$100 ). Coupons would be paid annually. Assume that the YTM will remain constant over time. 3. Tried and tested Ltd. has bond issue with an after-tax YTM of 6%.5 years from now they have 25 years left to mature and offera coupon rate of 8% paid annually. These bonds have a face value of $1,000 each. Stephanie wants her portfdio to be distributed approximately 595 between stocks and bonds such that around 5%(3%) of her investable funds are allocated to stocks and 95%(3%) to bonds. Her investment criteria further specify that: i For all stocks priced below $50,100 shares each of such stocks be purchased and for stocks priced above $50,50 shares each should be purchased. ii 100 units of each acceptable bonds be purchased. Questions: 1. Suppose Stephanie deposited the $50,000 in a fixed deposit. For the shortfall, she thought of purchasing a 5 -year ordinary anmity that pays an interestrate of 3.5% per annum, what annual deposit will be required to cover the shortfall? 2. Which of the two options would yourecommend for covering the shortfall (Choose between the optionsin questions 8 and 9 above). Support your response with suitable computation