Question
Invest Co has the following investments in its portfolio: 1. 2,000 bonds with 10 years remaining until maturity and with a coupon rate of 7.5%
Invest Co has the following investments in its portfolio:
1. 2,000 bonds with 10 years remaining until maturity and with a coupon rate of 7.5% and semi annual interest payments. The market rate of interest on similar bonds is 9%.
2. 5,000 shares of Coral Inc which just paid an annual dividend of $10 per share. Dividends are expected to maintain constant growth at 3% per year going forward. The market rate for similar investments is 12%
3. 1,000 shares in Kelly Co which have dividends planned for the next 3 years and then will not pay any more dividends after that. The market rate for similar investments is 12%
Dividends for the next three years are as follows: Yr 1 - $10 per share, Yr 2 - $25 per share and Yr 3 - $8 per share.
4. A 10 year annuity with quarterly payments of $1000 and a monthly compounding rate of 6%.
Please calculate the value in today's dollars of this portfolio.
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