Question

You have finally saved 10,000 and are ready to make your first investment. You have the three following alternatives for investing that money:
1) Captial cities ABC Inc. bonds with a par value of $1000 that pays an 8.75 percent on its par value in interest, sells for $1.34 and matures in 12 years.
2) Southwest Bancorp preferred stock paying a dividend of $2.50 and selling for $25.50.
3) Emerson Electric common stock selling for $36.75 with a par value of $5. The stock recently paid a $1.32 dividend and the firms earning per share has increased from $1.49 to $3.06 in the past five years. The firm expects to grow at the same rate for the foreseeable future.
Your required rate of return for these investments are 6 percent for the bond, 7 % for the preferred stock, and 15% for the common stock. Using this information answer the folling question.
Calculate the value of each investment based on your required rate of return.

Answer 1

$1134.14