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1. BA Corp is issuing a 10-year bond with a coupon rate of 6.93 percent. The interest rate for similar bonds is currently 5.82 percent. Assuming annual payments, what is the value of the bond? (Round answer to 2 decimal places, e.g. 15.25.)

2. IBM Corp. expects to earn $8.40 per share in the next year. IBM follows a policy of paying out 60% of all earnings as dividends, and reinvesting the rest. IBM's dividends and earnings are expected to grow at a constant rate of 4% in the future. You require a 9% rate of return on stock investments of similar risk. What is your estimate of the market value of IBM stock?

Financial Management, Finance

  • Category:- Financial Management
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