You have finally saved $ 10,000 and are ready to make your first investment . You the three following alternatives for investing that money

Bank of america bonds with a par value of $ 1.00 that pays a 6.34 percent on its para value in interest, sells for $ 1,020 and matures in 5 years .

Southwest Bancorp preferred stock paying a dividend of $ 2.63 and selling for $26.25

Emerson electric COMMON STOCK SELLING for $52 with par value of $ 5 . The stock recently paid a $ 1.60 dividend and the firm earnings per share has increased from $2.23 to $ 3.30 in the past 5 years . The firm expects to grow at the same rate for foreseeable future.

Your required rates of return for these investments are percent for the bond . 8 percent for the preferred stock, and 12 percent for the common stock . using this information , answer the following questions .

(a) calculate the value of each investment based on your required rate of return.

(b) Which investment would you select ? why ?

(c) Assume Emerson Electric expect an earnings to grew at 1 percent above the historical growth rate . How does this affect your answers to parts (a) and (b)?

(d) What required rates of return would make you indifferent to all three options .