You have purchased a bond one year ago. When you purchased this bond, it has a face value of $2500 with an annual coupon rate of 5% and 10 years to maturity. Calculate the price of this bond today if the required annual rate of return of similar bonds is 8 per cent. [15 marks]

b. How does your answer to (a) change with semi-annual coupon payments and a semi-annual discount rate of 4 per cent? Comment on your answer. [25 marks]

c. Assuming that a Stock is expected to pay a dividend of $6 in five years time. Thereafter the dividend growth is expected to be a constant annual rate of 6 per cent forever. If the required rate of return on similar stocks is 12 per cent, determine the price of this stocks.