1. A bond with a par value of $1000 and a coupon interest of 9.75% p.a. is currently trading at $925. Calculate its current yield.
2. Determine the approximate yield to maturity of a $500 par value bond with a coupon rate of10% p.a. (paid semi-annually), a current market price of $375 and a term to maturity of 15 years.
3. To finance a new line of product, the COB Corporation has issued $500,000,000 worth of bonds with a par value of $10,000, a coupon rate of 9% p.a. (paid monthly), and a maturity of 10 years. compute the price of the bond if the opportunity cost is 15% p.a.
4. A firm's preferred stock pays an annual dividend of $75 per share. Its par value is $250. If your required return is 14% p.a., what is the most you should pay for security?
5. In response to the stock market's reaction to the dividend policy, the MFI Corporation has decided to increase its dividend payment at a rate of 6% per year. The firm's most recent dividend is $3.50 and the required rate of interest is 11% p.a. What is the maximum price you should be willing to pay for a share of stock?
6. FMD Inc., has a beta of 1.835 the annual risk-free rate of interest is currently 3%, and the required return on the market portfolio is 14%. The firm estimates that its future dividends (per share) will continue to increase at an annual compound rate consistent with that experienced over the 2013-2016 period: 2013 = $2.70, 2014 = $2.95, 2015 = $3.25, 2016 = $3.40. Estimate the value of the firm's stock assuming today is December 31, 2016.