Reference no: EM132285111

1. Bookhouse, Inc. borrows $45,000 for 60 days at 11 percent interest. What is the dollar cost of the loan? (i.e., how much interest has to be paid on the loan?

2. Your company plans to borrow $4 million for 12 months, and your banker gives you a stated rate of 12 percent interest. You would like to know the effective rate of interest for the following types of loans. (Each of the following parts stands alone.)

a) Simple 12 percent interest with a 15 percent compensating balance.

b) Discounted interest, with no compensating balance.

3. The Federal Motors Company has a $1,000 par value bond outstanding that pays 8 percent annual interest. The current yield to maturity on such bonds in the market is 10 percent. Compute the price of the bonds for these maturity dates:

a) 20 years.

b) 10 years.

4.BMT Corporation recently issued preferred stock with a par value of $60 that pays a 7.5% annual dividend. If the stock currently yields 10%, what is its market value (price)?

5.AWM Corporation expects its common stock dividend to grow at a constant 5 percent for the foreseeable future. The company recently paid a $4.00 dividend. If the required rate of return on the company's stock is 11 percent, what is the value (price) of the stock today?