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Question 1

A bond has a face value of $1000 with a time to maturity ten years from now. The yield to maturity of the bond now is 10%.
a) What is the price of the bond today, if it pays no coupons?
b) What is the price of the bond if it pays annual coupons of 10%?
c) What is the price today if pays 8% coupon rate semi-annually?

Question 2

a) What is the value today of a $1000 bond, 8% coupon with annual coupon payments if the time to mature is 2 years and YTM is 4%?

Question 3

SalesTech is a constant growth company whose last dividend (D0, which was paid yesterday) was $2.00 and whose dividend is expected to grow indefinitely at a 6% rate. Find the share price.

Question 4
What is the impact on the estimated stock price if g falls to 5% or rises to 7%? If rs changes to 12%% or to 14%?

Question 5.

XYZCo is reinvesting 70% of its earnings in projects that provide a ROE of 9%.

The expected return on similar risky projects is 14% on the stock market. Given the present policy of the firm its year-end dividend is now $3 per share.

a) At what price will the stock sell?

b) What is the present value of the growth opportunities for XYZ Co?

Financial Management, Finance

  • Category:- Financial Management
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