Author: Anonymous

A share of common stock has just paid a dividend of $3.  If the expected long-run  growth rate for this stock is 17.2 percent, and if investors require a 27 percent rate of  return, what is the price of the stock?

You intend to purchase a 17-year, $1,000 face value bond that pays interest of $48 every every 6 months.  If your nominal annual required rate of return is 9.7 percent with semiannual compounding, how much should you be willing to pay for this bond?

Womack Toy Company’s stock is currently trading at $60 per share.  The stock’s dividend  is projected to increase at a constant rate of 8.2 percent per year.  The required rate of  return on the stock, rs, is 12.4 percent.  What is the expected price of the stock 9 years  from today?

A stock with a required rate of return of 13 percent sells for $28 per share. The stock’s  dividend is expected to grow at a constant rate of 3.6 percent per year. What is the  expected year-end dividend, D1, on the stock?

Meade Corporation bonds mature in 17 years and have a yield to maturity of 13.5 percent.  The par value of the bonds is $1,000.  The bonds have a 6 percent coupon rate and pay  interest on a semiannual basis.  What are the current yield and capital gains yield on the  bonds for this year? (Assume that interest rates do not change over the course of the  year.)

A 21-year bond with a par value of $1,000 has a 5.7 percent annual coupon. The bond  currently sells for $842.  If the bond’s yield to maturity remains at its current rate,  what will be the price of the bond 3 years from now?

The last dividend paid by Klein Company was $6.9.  Klein’s growth rate is expected to be  a constant 8 percent for 3 years, after which dividends are expected to grow at a rate  of 3 percent forever.  Klein’s required rate of return on equity (rs) is 15 percent.   What is the current price of Klein’s common stock? 

A share of preferred stock pays a quarterly dividend of $1.5.  If the price of this preferred  stock is currently $42, what is the nominal annual rate of return?

Meade Corporation bonds mature in 15 years and have a yield to maturity of 12 percent.  The par value of the bonds is $1,000.  The bonds have a 12.3 percent coupon rate and pay  interest on a semiannual basis.  What are the current yield and capital gains yield on the  bonds for this year? (Assume that interest rates do not change over the course of the  year.)

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?