193 You have just started your first job, and while retirement seems a long way off you have been told that starting to have now is a good idea. An article advises that for someone under 30 years old, it makes sense to have investments that are heavily weighted to stocks. Although stocks are riticier, the long holding period can provide benefits because of the higher expected return. Therefore, you decided that $100,000 that you just inherited from a beloved aunt that died unexpectedly should be inverted 80% ttocks, 10% coupon bonds and 10% zero coupon bonds. After some retearch it appears as though the following are solid investments, and you decide to go ahead 36 i Herd Ltd. Common Stock just paid a dividend of 5.50 per share, but things are looking up and the company has amndanced that its next dividend will be $1.50 pet share and that the dividend will grow at 10% per year for the following 2 years. After that, the dividend will grow at 6.0% per year forever. The required rate of return on this common stock is 90% i Pasture and Co. Zero Coupon Bonds due March 24, 2031. The yield to maturity on these bonds in 3.9% Stable, Inc. 3.8% Coupon Bonds due March 24, 2036. The bands pay interest remiannually and have a face value of $1,000. The yield to maturity on this bond is 3.8% 2 14. At what point in time can you use the constant dividend prosth model to determine the price of Herd Ltd. Common stock? & Never b. End of Year 1 End of Year 2 d. End of Year 3 e. End of Year 4 4 5 . 15 What is the present value of the dividend that is expected to be paid at the end of year 3 on Herd Ltd. Common Stock? a $0.47 b. $1.40 C$1.69 d $1 82 . 16. What is the current price of the Stable, Inc Bondt? a $966.17 b. 5934.90 c. 51,034.78 $ 15