SECTION V VALUATION AND RISK 13 POINTS 1. (8 Points) An investor is interested in purchasing a corporate bond. His broker quotes a price of $965. The $1,000 par value bond pay 9% interest, and has 20 years remaining until maturity. The current yield to maturity is 10% for similar bonds. Required: 1) What is the present value of the bond? 2) Should the investor buy the bond from the broker at the quoted price? 2. (5 Points) A company will pay a common stock dividend of $2.65 at the end of the year. The required rate of return on the common stock is 9%. The company has a constant growth rate of 5%. Required: Compute the current price of the stock