Question 4 (14 marks) a. Your broker, Nelson, has advised you that he believes that the stock of UCC is going to rise from $20 to $22 per share over the next year. The stock is also expected to pay a dividend of $0.5 per share next year. You know that the annual return on the S&P 500 has been 11% and the 90-day T-bill rate has been yielding 4% per year over the past 10 years. If beta for UCC is 1.3, will you purchase the stock? Explain with calculation. (6 marks) b. Consider the following bonds. Coupons are paid annually. The par value is $1,000. Which bond will you purchase if interest rates fall from the current yield to maturity of 12%? Explain with calculation. (8 marks) Bond Coupon Maturity A 0% 3 years B 8% 4 years