Reference no: EM132847433
1. You just purchased a semi-annual coupon bond which matures in 5 years. The bond has a face value of $1,000, an 8% coupon rate, and its current yield is 8.29%. What is the bond's YTM?
2. You hold two semi-annual coupon bonds in an investment portfolio. The first bond is a 5-year, zero coupon bond that currently yields 3.55%. The second bond is a 7-year bond with a 5.2% coupon rate and a current price of $908. If all interest rates in the economy decrease by 0.5%, what will be the capital gain (in dollars and percentage) on this portfolio?
3. The common shares of Krusty Burger, Inc. currently sell for $20. The stock just paid a dividend of $1.50 per share. Analysts expect that the dividend will grow at a constant rate of 8% per year. What is the required rate of return on the company's stock? What stock price is expected one year from now?
4. ABC Corporation's common stock dividend yield is 3.45%, it just paid a dividend of $2.55, and is expected to pay a dividend of $2.87 one year from now. Dividends are expected to grow at a constant rate indefinitely. What is the required rate of return on ABC stock?
5. Biogenetics, Inc. plans to retain and reinvest all of their earnings for the next 30 years. Beginning in year 31, the firm will begin to pay a $25 per share dividend. The dividend will increase at an 5% rate annually thereafter. Given a required return of 13%, what should the stock sell for today?
6. When you bought a share of stock in Killnum yesterday, analysts believed that the dividend next period would be $1.50 and that dividends would grow by 8%. Today Killnum Corp. announces that the dividend for the next year will be $2.00 per share rather than the originally expected $1.50 per share. From then on, it is expected that dividends will resume their historical constant growth rate of 5% per year. If your required rate of return is 12.5%, what will be your overnight capital gains yield on this stock?
7. CBC stock is expected to sell for $25 two years from now. Supernormal growth of 5% is expected for the next 2 years. The current dividend is $1.95 and the required return is 15%. What constant growth rate is expected beginning in year 3?
8. Among Homer Simpson's many experiences as an (failed) entrepreneur is the time that he started a firm to recycle used grease. The current dividend on this stock is $0.90, and Homer expects that the dividend growth rate will be 6% for each of the next two years, 12% in the third year, and then will remain steady at 10% thereafter. Given the risky nature of purifying grease, prospective investors require a 15% rate of return if they are to invest in the stock of this enterprise. How much is this stock worth today? Based on the above information, how much should you expect the stock to cost in three years?