Reference no: EM1319313

1. Pierre Dupont just received a cash gift from his grandfather. He plans to invest in a five-year bond issued by Venice Corp. that pays an annual coupon of 5.69 percent. If the current market rate is 9.01 percent, what is the maximum amount Pierre should be willing to pay for this bond?

2. Four years ago, Lisa Stills bought six-year, 12.38 percent coupon bonds issued by the Fairways Corp. for $947.68. If she sells these bonds at the current price of $886.85, what will be her realized yield on the bonds? Assume similar coupon-paying bonds make annual coupon payments.

3. Rockne, Inc. has outstanding bonds that will mature in six years and pay an 8 percent coupon semi-annually. If you paid $1,105.43 today and your required rate of return was 5.30 percent. What is the worth of the bond?

4. Adrienne Dawson is planning to buy 10-year zero coupon bonds issued by the U.S. Treasury. If these bonds have a face value of $1,000 and are currently selling at $425.10, what is the expected return on them? Assume that interest compounds semi-annually on similar coupon paying bonds. effective rate of return?

5. Nynet, Inc., paid a dividend of $4.00 last year. The company's management does not expect to increase its dividend in the foreseeable future. If the required rate of return is 18.5 percent, what is the current value of the stock?

6. Ron Santana is interested in buying the stock of First National Bank. While the bank expects no growth in the near future, Ron is attracted by the dividend income. Last year the bank paid a dividend of $7.00. If Ron requires a return of 15.5 percent on such stocks, what is the maximum price he should be willing to pay for a share of the bank's stock? 

7. Reco Corp. is expected to pay a dividend of $2.27 next year. The forecast for the stock price a year from now is $40.00. If the required rate of return is 18.0 percent, what is the current stock price? Assume constant growth.

8. The preferred stock of Axim Corp. is currently selling at $48.63. If the required rate of return is 11.4 percent, what is the dividend paid by this stock?