1) Givens, Inc., is fast growing technology company which paid $1.25 dividend last week. Company's expected growth rates over next 4 years are as follows: 25%, 30%, 35%, and 30%. Company then expects to settle down to constant-growth rate of 8% annually. If required rate of return is 12%, determine the present value of dividends over fast growth phase?
2) Both Bond Sam and Bond Dave have 7% coupons, make semi-annual payments, and are priced at par value. Bond Sam has 3 years to maturity, while Bond Dave has twenty years to maturity.
If interest rates suddenly increase by 2%, determine the percentage change in price of Bond Sam and Bond Dave?
If rates were to unexpectedly fall by 2% instead, what would be percentage change in price of Bond Sam and Bond Dave?