Reference no: EM131000364

Q.1 A non-redeemable preference share is paying a constant dividend of $7. What is the current price if the market yield for such shares is 13 %? Your answer should be calculated to the nearest cent, e.g. 23.167 should be entered as 23.17. Do not enter the $ sign.

Q.2 Fab Co has just paid a dividend of $1.6. The company pays dividends annually. Dividends are expected to grow at 14% pa for the next two years and for 4% thereafter for the foreseeable future. How much will the dividend be at the end of the fifth year? Answer to the nearest cent, e.g $5.678 should be entered as 5.68. Do not enter the $ sign.

Q.3 Polycorp is about to issue debentures. The following information is available.
1. The coupon rate is 8% pa (or .08). Coupons are paid annually
2. The yield to maturity (YTM) is 0.05 pa
3. The face value is $100
4. The term is 5 years

How much can the debentures be issued for? Your answer should be accurate to the nearest cent. Note that the YTM is expressed as a decimal, so .06 is 6% pa.

Q.4 Polycorp has just paid a dividend of $4. The company pays dividends annually. Dividends are expected to grow at 0.1 pa for the next two years and for 0.04 thereafter for the foreseeable future. At what price should the shares sell for at the end of year two if the required rate of return is 0.19? Answer to the nearest cent, e.g $5.678 should be entered as 5.68. Do not enter the $ sign. Note that all growth rates and the required rate are expressed as a decimal, so .06 is 6% pa.

Q.5 Polycorp wishes to issue a 90 day bank bill with a face value of $2,000,000. If the current 90 day rate is 7% how much will Polycorp issue the bill for. Calculate to the nearest dollar.

Q.6 What is the price today of a zero coupon bond with a face value of $7,000 if the relevant market yield is 10% pa and with 5 years to maturity? Calculate the price to the nearest dollar

Q.7
FV = $100
Price = $102.46
Coupon Rate = 6.5%
Term = 6 years

Given the information above calculate the yield to maturity (YTM). Calculate as a percentage correct to two decimal places. Do not enter the percentage (%) sign.

Q.8

When Polycorp issued its debentures three years ago, they had six years remaining to maturity. Using the following information, calculate the price of the debentures today.

Face value = $100
Coupon Rate = 0.06
Yield = 0.08

Both the coupon rate and the yield are expressed as decimals, e.g. 12% pa is expressed as .12

Calculate the price accurate to two decimal places. Do not enter the $ sign.

Q.9 From the following information calculate the price of the stock. The annual dividends for years 3, 4 and 5 will be $1.00, $1.20 and $1.30, respectively. After year 5, dividends are expected to grow by 3% pa forever. The required rate of return is 10% pa.

$14.26

$10.00

$13.18

$1.57

$22.00

Q.10 When interest rates are positive, a standard fixed coupon bond with a coupon rate of 10% pa is selling at a discount. What is the yield?

8%

9%

11%

6%

10%

Q.11 A bond has a 10 percent coupon rate and a $100 face value. Interest is paid semi-annually and the bond has 20 years to maturity. If investors require a 12 percent pa yield, what is the bond's value?

$80.95

$48.95

$89.95

$84.95

cannot be determined not enough information

Q.12 A friend of UST wishes to establish a trust to pay a perpetual scholarship in the memory of his mother. The scholarship would be offered every three years with the first one awarded immediately. The amount of the scholarship would be $30000. How much would he have to pay into a trust fund now to meet its commitments, if the fund can earn returns of 5% per annum?

190325

230000

200000

600000

220325

Unable to calculate because you need a three year rate and this is not given.

630000