Task 4: Stock and Bond Valuation [20 marks] 1. A company just paid $4 dividend (D0) which is going to grow up 2.5% (g) annually. Assuming that required rate of return (r) is 5% p.a., what is the current price of the stock using DDM? From the effective items in valuation of stock (i.e., D0, g and r) which one could change tomorrow or in the near future which significantly impacts on the price of stock? [10 marks] 2. A corporate bond has a face value (F V ) of $1000, time to maturity (T TM) of 10 years and coupon rate (Cr) of 2.5% p.a.. Assuming that required rate of return (r) is 5%, what should be the current price of the bond? From the effective items in calculating the bond price (i.e., Cr, F V and r) which one could change tomorrow or in the near future which significantly impacts on the price of the bond? [10 marks]