1. You have just purchased a 10-year, $1,000 par value bond. The coupon rate on this bond is 8 percent annually, with interest being paid each 6 months. If you expect to earn a 10 percent of return on this bond, how much did you pay for it?
2. A bond with $1,000 face value and a $100 annual interest payment with five years to maturity would
3. Consider a $1,000 par value bond with a 7 percent annual coupon. The bond pays interest annually. There are 9 years remaining until maturity. What is the price of this bond assuming that the required return on the bond is 10 percent?
4. You bought a 10 percent, 10-year bond with the $1,000 face value that paid interest annually at a price of $1,200. What is the bond's yield to maturity?
5. You bought a bond at the price of $980. Its annual coupon payment is $90. What is its current yield?
6. What is the price of zero-coupon bond if its face value is $1,000, matures in 15 years, and the market interest rate for debt security is 7%?
7. A municipal bond carries a coupon of 7% and is trading at par; to a taxpayer in a 28% tax bracket, what is the taxable equivalent yield this bond would provide?
8. A share of preferred stock pays a dividend of $0.50 each quarter. If you are willing to pay $20.00 for this preferred stock, what is your annual rate of return?
9. The last dividend on Spirex Corporation's common stock was $4.00, and the expected growth rate is 10 percent. If you require a rate of return of 20 percent, what is the highest price you should be willing to pay for this stock?
10. Company MG is expected to pay a dividend of $5, the growth rate of the company is predicted to be 8%. If your required rate of return is 15%, what is the price of this stock?
11. Garcia Inc. has a current dividend of $3.00 per share (D0 = $3.00). Analysts expect that the dividend will grow at a rate of 25 percent a year for the next three years, and thereafter it will grow at a constant rate of 10 percent a year. If an investor’s required rate of return is 15 percent, what should be the current stock price of Garcia Inc.?
12. Company IC paid a dividend of $0.50 last year. The growth rate for the next 15 years is expected to be 20%. and then the growth rate is expected to be a constant 7 percent thereafter. The required rate of return on equity is 10 percent. What is the current price of the common stock?
13. Which of the following Treasury bonds will have the largest amount of interest rate risk?
14. If the constant growth model of stock price is to give a "reasonable" valuation of a stock, which of the following is not a valid assumption for the model?
15. Company CT pays constant annual dividends of $2 per share and the price of the stock is $20 in the market. If your required rate of return is 12% should you buy this stock?