Blog

A corporate bond has a face value of $1,000, and pays a $74 coupon semiannually (that is, the bond has a 14.8 percent coupon).  The bond matures in 27 years and sells at a price of $1,300.  What is the bond’s nominal yield to maturity?

Meade Corporation bonds mature in 22 years and have a yield to maturity of 8.2 percent.  The par value of the bonds is $1,000.  The bonds have a 7 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.)

If D1 = $9, g (which is constant) = 6.6%, and P0 = $139, what is the stock’s  expected capital gains yield for the coming year?

McKenna Motors is expected to pay a $2 per-share dividend at the end of the year  (D1 = $2).  The stock sells for $15 per share and its required rate of return is 21.1  percent.  The dividend is expected to grow at a constant rate, g, forever.  What is the  growth rate, g, for this stock?

A 24-year bond with a 11.1 percent semiannual coupon and a $1,000 face  value has a nominal yield to maturity of 8.2 percent.  The bond currently sells for  $1,302.26. The bond, which may be called after 2 years, has a nominal yield to  call of 1.25% percent.  What is the bond’s call price?

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 $9.2 per share and a par value of $59.  If the required return  on this stock is currently 12.2 percent, what should be the stock’s market value?

A 16-year bond has a 5 percent annual coupon, a yield to maturity of 4 percent, and a face value of $1,000.  What is the price of the bond?

A share of common stock has just paid a dividend of $5.7.  If the expected long-run  growth rate for this stock is 4.8 percent, and if investors require a 15 percent rate of  return, what is the price of the stock?

Womack Toy Company’s stock is currently trading at $10 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 6.8 percent.  What is the expected price of the stock 9 years  from today?

You intend to purchase a 25-year, $1,000 face value bond that pays interest of $58 every every 6 months.  If your nominal annual required rate of return is 11.2 percent with semiannual compounding, how much should you be willing to pay for this bond?