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Investors required rate of return

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Reference no: EM131721423

1. Calculate the value of a share of stock that is expected to pay $1 dividend at t=1, with dividends expected to grow at a constant rate of 2% per year forever thereafter. Use 14.5% as the discount rate.

a. $10.00 

b. $6.90

c. $6.87

d. $8.00

e. $50.00

2. Moonlight Over LaLa Land (MOLL) Co. bonds pay an annual coupon of 9.5%. They have 8 years to maturity and a face value of $1,000. Compute the value of MOLL's bonds if investors' required rate of return is 10%.

a. $1,516.18

b. $1,027.17

c. $973.33

d. $950.00

3. Old Imbalance Footwear, Inc., stock pays $3.20/share each year in dividends, with investors' required return equaling 10%. What is the price of a share of stock?

a. $320

b. $16

c. $32

4. Calculate the value of a 1-year zero-coupon bond (i.e. a bond with a coupon rate equal to 0%) that has a face value of $1000. Use a required rate of return of 25% in your calculation.

a. $800

b. $1250

c. $750

Reference no: EM131721423

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