QUESTION 3 You are considering three investments: Investment 1: Bond that is selling in the market at $1,200. The bond has a $1,000 par value, pays interest at 15 percent, and is scheduled to mature in 10 years. For bonds of this risk class, you believe that a 12 percent rate of return should be required. Investment 2: Preferred stock ($100 par value) that sells for $90 and pays an annual dividend of $15. Your required rate of return for this stock is 15 percent. Investment 3: Common stock ($35 par value) that recently paid a $4 dividend. The firms return on equity is 12.3%. The firms earning per share was $6.00 and it paid $3.20 in dividends per share. The stock is selling for $30, and you think a reasonable required rate of return for the stock is 18 percent.

a. Calculate the value of each security based on your required rate of return.