Question 3 (15 marks) Suppose you are the portfolio manager of one of the largest fund houses in Hong Kong and are evaluating the securities issued by Orange Corporation. Orange is currently experiencing some cash flow problems because COVID-19 has reduced the sales of the corporation by 60%. Its management expects no yearly dividend payment will be made for the next 2 years. However, the dividend for Year 3 will be $5 per share, and the dividend is expected to grow at a rate of 10 percent in Year 4,5 percent in Year 5 and 10 percent from Year 6 onwards. The required return of the stock is 12% a. Suppose Orange issues an 8 percent semiannual coupon bond with a face value of $1,000 that matures in 7 years. If the yield is 10 percent, compute the fair price of the Orange's bond. (4 marks) b. Suppose the preferred stock is expected to pay a $0.50 dividend every quarter and the required return is 10 percent with quarterly compounding, compute the fair price of Orange's preferred stock. (3 marks) Would you invest in the common stock of Orange if its current market price is $201.8? Explain. (8 marks) (Total 15 marks) c