Mini Cas1 - M ini Case You have finally saved $10,000 and...

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Mini Case You have finally saved $10,000 and are ready to make your first investment. You have the three following alternatives for investing that money: A CBS bond with a par value of $1,000, an interest rate of 7.625 percent, and a maturity of 10 years. The bond is selling for $986. Alabama Power Company preferred stock with a $50 par value and a dividend of $2.8125 per year. The stock is currently trading at $39 per share. Emerson Electric common stock that is selling for $80 with a par value of $5. This stock recently paid a $2.10 dividend, and the firm’s earnings per share have increased from $2.40 to $4.48 in the past 5 years. An equivalent amount of growth in the dividend is expected. Your required rates of return for these investments are 6 percent for the bond, 7 percent for the preferred stock, and 15 percent for the common stock. Using this information, answer the following questions. a.
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This note was uploaded on 11/07/2010 for the course FINANCIAL bus410 taught by Professor Tong during the Spring '10 term at AIU Online.

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Mini Cas1 - M ini Case You have finally saved $10,000 and...

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