Estimate the current price for bond

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1. Johnston Corporation is growing at a constant rate of 6 percent per year. It has both common stock and non-participating preferred stock outstanding. The required rate of return on preferred stock (cost of preferred stock) is 8 percent. The par (stated) value per share of the preferred stock is $120, and the stock has a stated dividend of 10 percent of par. What is the estimated fair market price per share per share of the preferred stock?

2. A bond makes annual coupon payments, has an annual coupon rate of 11 percent , a maturity of 20 years, and a face value of $1,000. The market further believes that the yield to maturity (YTM) for this bond is equal to 8.83 percent (annual rate). Estimate the current price for this bond.

Reference no: EM131942966

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