Please show all work. Failure to show work will result in few if any points.

1. You plan to hold Stock X for 20 years, at which point you expect to sell it for $500. You expect Stock X to adhere to the dividend payment schedule below. The appropriate discount rate is 7.5%. What is the most that you are willing to pay for the stock?

YearDividend ($)

1-26

3-86.10

9-126.15

13-206.25

2. A 12-year bond with a $1,000 par value sells for $940. The market rate of interest is 7.5%, and the bond pays interest semi-annually. What is the coupon rate?

3. You expect Stock A to pay a dividend of $3 next period, and you expect the dividend to grow at 2% forever. If the appropriate market rate of interest is 9%, what is the most that you are willing to pay for the stock?