The price of the bond will decline over time

Assignment Help Financial Management
Reference no: EM131986762

1. A bond has an 8% annual coupon and a 7.5% yield to maturity. Which of the following statements is CORRECT?

If the yield to maturity remains constant, the price of the bond will decline over time.

The bond sells at a price below par.

The bond sells at a discount.

2. New Gadgets, Inc., currently pays no dividend but is expected to pay its first annual dividend of $5.60 per share exactly 9 years from today. After that, the dividends are expected to grow at 3.3 percent forever. If the required return is 12.7 percent, what is the price of the stock today??

Reference no: EM131986762

Questions Cloud

Wondering about the value of college education : Diane has just turned 18 and also completed high school and is wondering about the value of a college education.
How can a global company react to the general trend : How can a global company react to the general trend?
Which yield-curve is likely predictor of economic recession : Which yield-curve is a likely predictor of economic recession?
What is yearly interest rate being offered by the dealer : What is the yearly interest rate being offered by the dealer? (to the? customer)?
The price of the bond will decline over time : If the yield to maturity remains constant, the price of the bond will decline over time.
What is the required return on the stock : A stock just paid dividend of $5.37 and is expected to maintain constant dividend growth rate of 4.6 percent indefinitely. what is the required return on stock?
Estimation of the production of gold from meikl mines : American Barrick’s estimation of the production of gold from Meikl Mines had turned out to be far lower than the actual capacity.
What rate of return would you earn if you bought investment : What rate of return would you earn if you bought this? investment?
What is its free cash flow : This year, FCF Inc. has earnings before interest and taxes of $10230000, depreciation expenses of $500000, what is its free cash flow?

Reviews

Write a Review

Financial Management Questions & Answers

  Passive investing strategy using the separation property

Theoretically, what would be necessary to construct a portfolio of two risky assets that would result in a portfolio standard deviation of zero? Describe a passive investing strategy using the separation property and/or the mutual fund theorem.

  Depreciation will equal capital expenditures in each year

Following is a four-year forecast for Torino Marine. Year 2015 2016 2017 2018 Free CFs in million -76 92 112 150 a. Estimate the fair market value of Torino Marine at the end of 2014. Assume that after 2018, earnings before interest and tax will rema..

  What is the irr of the set of cash flows

What is the IRR of the following set of cash flows? (Round your answer to 2 decimal places. (e.g., 32.16))

  What is the companys expected rate of return

The Fun Company's stock has a 50% chance of producing a 23% return, a 30% chance of producing a 20% return and 20% chance of producing a -29% return. What is the company's expected rate of return?

  Calculate the demand equation

You have been hired as a marketing consultant to Johannesburg Burger Supply, Inc., and you wish to come up with a unit price for its hamburgers in order to maximize its weekly revenue. Your market studies reveal the following sales figures: When the ..

  The yield to maturity on a bond is the rate of return

The yield to maturity on a bond is the rate of return that equates to the present value of the bond's future cash flows with the bonds

  What is the total cost for one contract

What is the total cost for one contract? Suppose you purchase the June 2011 put option on orange juice futures with a strike price of $1.75. How much does your option cost per pound of orange juice? What is the total cost for one contract?

  Analysts are forecasting that stock is predicted to return

Analysts are forecasting that the stock is predicted to return 15.7%. Should the stock be included in the portfolio?

  What will be the effect on profit of accepting the order

PowerDrive, Inc. produces a hard disk drive that sells for $175 per unit. What will be the effect on profit of accepting the order? Please show how to do this.

  The higher a firms operating leverage

Defense Dynamics is considering a project that will have fixed costs of $12,000,000. Its sale price will be $37.50 per unit, and it will have a variable cost per unit of $11.25. When other things are held constant, the higher a firm's operating lever..

  What impact would change have on the equity value

What impact would this change have on the equity value of the business? What if the growth rate were only 2 percent?

  Present value formula to determine the amount to be invested

Use the present value formula to determine the amount to be invested ?now, or the present value needed.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd