Assignment
Remember: you will be expected to show your all work, including timeline, formulas, inputs and outputs from your calculator.
1. Calculate the price of a 9 % bond with $1,000 par and 6 years to maturity that pays semiannual coupons. The yield to maturity on similar bonds is 8.5 %.
2. A 15-year bond with 6 percent annual coupon rate. The bond pays semi-annual coupon. The bond's market price is $963.20. Calculate the Yield to Maturity.
3. A bond has a face value of $1,000, a coupon of 4% paid annually, a maturity of 36 years, and a yield to maturity of 7%. What rate of return will be earned by an investor who purchases the bond for $608.94 and holds it for 1 year if the bond's yield to maturity at the end of the year is 9%?
4. General Matter's outstanding bond issue has annual coupon rate of 10.6%, and it sells at a yield to maturity of 8.70%. The firm wishes to issue additional bonds to the public at face value. What coupon rate must the new bonds offer in order to sell at face value?
5. Fincorp will pay a year-end dividend of $2.40 per share, which is expected to grow at a 4% rate for the indefinite future. The discount rate is 12%. What is the stock selling for?
6. How much should you pay for a share of stock that offers a constant growth rate of 10%, requires a 16% rate of return, and is expected to sell for $50 one year from now?
7. JetHair's earnings are $1.5 per share. The firm's ROE is 15% and its payout ratio is 30%.
a. What is JetHair's dividend for next year if its required rate of return is 20%?
b. What is the stock price?