Question 3 (25 marks) (a) Silver Metals Inc. has a 12% bond with semi-annual coupons that is currently trading at $1,586.39. The bond will mature in 25 years and has a face value of $1,000. (i) Compute the bond's current YTM (APR). [Hint: The YTM is an integer.] (4 marks) (ii) Compute the bond's current yield. (2 marks) (iii) Suppose you bought the bond at $1,586.39. Now three years have gone by and the bond's yield to maturity (APR) has gone down by 1% over the period (see Part (ai)). What is the selling price of the bond? (3 marks) (iv) If you decide to sell the bond immediately after the receipt of the (latest round of) coupon payment, compute the capital gains yield. (2 marks) (v) During the 3-year holding period, you invested the coupons received at 6%, compounded semi-annually. Determine the average yearly rate of return of your bond investment over this 3-year period? (6 marks) (b) ABC Corporation has just paid dividends of $2 per share. The market forecasts that, over the next three years, dividends will grow as follows: 4% in Year 1, 14% in Year 2 and 24% in Year 3. After that, the growth is expected to maintain at a constant growth rate of 9% per year. The required rate of return is 15% per year. Calculate the theoretical stock price using the non-constant dividend growth model. (8 marks)