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Several years ago, Lucian Technologies issued preferred stock with a stated annual dividend of [d]% of its $[p] par value. Preferred stock of this type currently yields [r]%. Assume dividends are paid annually. What is the estimated value of Lucian’s preferred stock? Round your answer to the nearest cent. 

Below are the formulas for Exam 2:

What is price risk (aka interest rate risk)? What kinds of bonds have greater price risk?

What do bond ratings reflect or indicate to investors about the borrower?

Suppose that Green Productions sold an issue of bonds with a [t]-year maturity, a $1000 par value, a [c]% coupon rate, and semiannual interest payments and that [x] years after the bonds were issued, the going rate of interest on bonds such as these fell to [r]%. At what price would the bonds sell? Round your answer to the nearest cent.

Below are the formulas for Exam 2:

We covered three scenarios for estimating all future dividends. State each scenario, briefly describe and state how we estimate the stock price under each scenario.

A bond trader purchased a(n) [n]-year, [c]% coupon bond at a yield to maturity of [y1]%. Immediately after she purchased the bonds, interest rates fell to [y2]%. What is the percentage change in the price of the bond after the decline in interest rates?  Assume annual coupons and annual compounding. Do not round intermediate calculations. Round your answer to two decimal places and express in percentage form (x.xx%).

The real risk-free rate is [rf]%, and inflation is expected to be [h]% for the next 2 years and then [i]% thereafter. A 5-year Treasury security yields [r]%. What is the maturity risk premium for the 5-year security? Round your answer to two decimal places and express in percentage form (x.xx%).

If you used Excel to do your work, please upload your Excel file to this question. If you did your work by hand, you should scan your work into ONE file using an app like Adobe Scan and upload the file to this question. If you cannot do that, you should e-mail me all pictures of your work IMMEDIATELY upon submitting the exam if you want partial credit for incorrect answers.