Author: Anonymous

A 11-year bond with a 11.4 percent semiannual coupon and a $1,000 face  value has a nominal yield to maturity of 8.1 percent.  The bond currently sells for  $1,237.31. The bond, which may be called after 5 years, has a nominal yield to  call of 7.54% percent.  What is the bond’s call price?

If the required return on a stock is 10% and the constant growth rate is 4% per year, then

Womack Toy Company’s stock is currently trading at $18 per share.  The stock’s dividend  is projected to increase at a constant rate of 2 percent per year.  The required rate of  return on the stock, rs, is 5 percent.  What is the expected price of the stock 8 years  from today?

A share of common stock has just paid a dividend of $2.5.  If the expected long-run  growth rate for this stock is 8.4 percent, and if investors require a 20 percent rate of  return, what is the price of the stock?

A share of preferred stock pays a semiannual dividend of $2.9.  If the price of this preferred  stock is currently $88, what is the nominal annual rate of return?

A 28-year bond has a 7 percent annual coupon, a yield to maturity of 8 percent, and a face value of $1,000.  What is the price of the bond?

McKenna Motors is expected to pay a $1 per-share dividend at the end of the year  (D1 = $1).  The stock sells for $28 per share and its required rate of return is 15.7  percent.  The dividend is expected to grow at a constant rate, g, forever.  What is the  growth rate, g, for this stock?

A bond with a face value of $1,000 matures in 25 years and has a 9.4 percent semiannual coupon.  (That is, the bond pays a $47.00 coupon every six months.)   The bond has a nominal yield to maturity of 9.3 percent, and it can be called in 3 years at a call price of $1,088.00.  What is the bond’s nominal yield to call?

The Jones Company has decided to undertake a large project. Consequently, there is a  need for additional funds.  The financial manager plans to issue preferred stock with a  perpetual annual dividend of $2.7 per share and a par value of $78.  If the required return  on this stock is currently 9 percent, what should be the stock’s market value?

In a valid constant growth model, the required return is ___________ than the growth rate, and the growth rate is _____________.