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What is one share of this stock worth today

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Reference no: EM132963430

Question -

a) POI Corporation has 8% coupon bonds outstanding which would be matured in 11 years. The bonds pay interest semi-annually. It is known that the face value of the bond is $1000, and the yield to maturity is 7%.

i. What is the market price of the bond (Assuming semi-annual compounding)?

ii. Is it a premium bond, par bond, or discount bond?

b) The common stock of DEF Limited pays a constant annual dividend of $4.95 a share forever. It is known that the discount rate is 16%.

i. What is one share of this stock worth today?

ii. Based on the dividend growth model or the constant dividend model, do you expect the stock price will increase, decrease, or remain unchanged a year later (compared to today)?

Reference no: EM132963430

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