A stock you are evaluating is expected to experience supernormal growth in dividends of 10 percent, gs , over the next five years. Following this period, dividends are expected to grow at a constant rate of 4 percent, g. The stock paid a dividend of $4 last year, and the required rate of return on the stock is 15 percent. You are to calculate the fair present value of the stock is calculated as follows: (Present the formula, show your solution and highlight your answer/s) 1.Find the present value of the dividends during the period of supernormal growth. Use the table below.

.Find the present value of dividends after the period of supernormal growth.

a. Find stock value at beginning of constant growth period (5 marks)

b. Find present value of constant growth dividends (3 marks)

3. Find present value of stock = Value during supernormal growth period + Value during normal growth period (2 marks)

4.Using the same data above, assuming the coupon will mature on 5 years. You want to know the fixed-income security that pays interest annually, calculate the Duration using the above rate of return as the YTM. Use the table below.( 25 marks)