Reference no: EM132679372

Question 1: Walker Industries is planning to issue new 15-year bonds (with semi-annual coupons). The company already has bonds outstanding- specifically, 7.5% semi-annual coupon bonds maturing in 16 years which currently sell for $1,046.25. Generally, when new bonds are issued, they are set to sell at par. What coupon rate would the new bonds have to have in order for them to be sold at par?

Question 2: A share of stock is expected to pay a $2.00 dividend in year one, a $2.50 dividend in year two, no dividend in year three, and a and a $3.50 dividend in year 4. Dividends will grow thereafter at a rate of 5% annually. If the investor's required rate of return is 20%, find the value he places on this share of stock. If the investor's required rate of return is 20%, find the value he places on this share of stock.
What is the present value of an infinite annuity of $3,000, which provides the first payment in exactly 7 years? Your opportunity cost of funds is 9% .

Question 3: Imagine you are a technical analyst and that you believe you can consistently and systematically make a profit using technical analysis strategies (basically, trading on patterns forecasted by past trends in price movements). What can you tell me about your beliefs about the efficient market hypothesis? Do you believe the market is efficient? If so, please explain clearly which form you must believe in (based on your actions)- is it weak, strong form or semi strong form? Why? Justify. This is an essay question. There is no work to be shown. Write in proper essay format.