Required yield to maturity on a comparable-risk

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1. (Bond valuation) Calculate the value of a bond that matures in 10 years and has a $1,000 par value. The annual coupon interest rate is 9 percent and the market's required yield to maturity on a comparable-risk bond is 15 percent. What would be the value of this bond if it paid interest semiannually?

2. (Yield to maturity) Settles Co.'s bonds mature in 15 years and pay 8 percent interest annually. If you purchase the bonds for $1,175, what is their yield to maturity?

3. (Common stock valuation) Foster Motor, Inc., paid a $3.75 dividend last year. If Foster's return on equity is 24 percent, and its retention rate is 25 percent, what is the value of the common stock if the investors require a 20 percent rate of return?

4. (Common stock valuation) Redford, Inc.'s outstanding common stock is currently selling in the market for $33. Dividends of $2.30 per share were paid last year, return on equity is 20 percent, and its retention rate is 25 percent.

  • What is the value of the stock to you, given a 15 percent required rate of return?
  • Should you purchase this stock?

Reference no: EM131757042

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