Present value of an annuity (or bond, in this case, with semiannual coupon payments):
Suppose Ford Motor Company issued corporate debt (rated S&P BBB) on this basis:
Issue date: 12-08-2006
Maturity date: 12-08-2026
Coupon rate: 4.346 pct.
Price at issue = 100.
What is the yield to maturity (annualized) if the market price for this bond today is 102.3?
What is the current price for that same bond if the coupon rate were 7.5 percent and the yield to maturity were 4.68 percent?
Credit card payments:
How long would it take you (how many payments and how many years) to pay off a credit card with an APR of 17.9 percent if you borrowed $2,025 and make minimum payments of $45 per month?
Same question, but use minimum payments of $100 per month.
What is the effective annual rate (EAR) of this credit card?
Dividend growth model (DGM or Gordon Growth Model) questions:
What should the stock price of IBM be today if the relevant data are as follows:
Dividend just declared (quarterly): $1.40
Growth rate: 0.15 percent
Required return (current dividend yield): 3.27 percent dividend yield
What is IBM’s required return (required dividend yield) if the current price is $174.42, the dividend is the same ($1.40 per quarter), and the growth rate is 0.15 percent (also the same)?
Bonds and credit ratings:
What is the most recent credit rating of Vanderbilt University (considered separately from its medical center)? Please give me the rating, which rating agency issued it, and the date of issue of the rating (or the issue date for the bond on which the rating was issued).
The Vanderbilt Medical Center was spun off from the University a few years ago and made to issue its own debt securities and raise its own funds. To date, the spinoff apparently has been a financial success. Same questions now for the Medical Center:
What is its credit rating, which agency issued the rating, and when was it issued?
Chapter 12 versus Chapter 8:
In Chapter 12, we were introduced to the Security Market Line (also called the Capital Assets Pricing Model), SML or CAPM. Using that formula, calculate the Required Return on Equity (RE) for National Health Corp. (NHC). Tell me the date and time, source of quotation, and stock price of NHC on the day that you looked up the NHC statistics used in the SML/CAPM formula. What are the elements of that formula, and what were the values of each for NHC on the date you looked? Use the Treasury’s 10-year bond yield on the same date to determine the risk-free rate (Rf).
In Chapter 8, we encountered variations of the Dividend growth model (DGM) or Gordon Growth Model and its formula(s)(see Question 3 above). Using the data below, what should be the Required Rate of Return (R) for Ford (F) shares as of 4-21-2017? The answer may be different from the methodology used in Question 5(a) because a formula with different elements is used. You may round your answer to hundredths of a percent (e.g., 5.15 percent).
Dividend just declared (D0): $0.60 annualized
Stock price today (P0): $11.34
Growth rate (g): 1.72 percent.