III Numerical [30 points] 4. Suppose a bond has a maturity of 3 years, annual coupon payments of $5, and a face value of $100. The risk free interest rate is 4 percent and the bond has a risk premium of 2 percent. Is the price of the bond higher or lower than the face value? Compute. 5. Consider Apple and Microsoft stocks. For each, the expected dividend next year is $100. The risk premium is 3 percent for Apples and 8 percent for Microsoft. The economy's safe interest rate is 5 percent. Compute the price of each stock. Why is one price higher than the other? [For simplicity assume that no dividends are received in the future after one year period.] 6. Bond A has a face value of $100 with maturity of 10 year. Bond B has a face value of $100 and matures in 5 years. Bond A has no coupon payment, and bond B pays $10 per year. Calculate the price of each bond if the risk free interest rate is 6 percent.