Reference no: EM132466954

1. The preferred stock of Concord Inc. is currently trading at $138.10 per share. If the required rate of return is 8 percent and this stock has no maturity date, what is the quarterly dividend paid by this stock?

2. What is the multi-stage DDM applied price of a stock which is expected to begin paying a $3 dividend 6 years from now. The firm is expected to grow dividends by 15% per year for the next four years after that, followed by a constant growth rate of 4% thereafter forever. Assume that investors require a rate of return of 16% for this firm's common shares.

-$25.75

-$16.36

-$11.23

-$18.75

3. Kingbird Mining Inc.'s share is currently selling for $110. The current dividend is $8.00 and the required rate of return is 10 percent.

What is the expected dividend growth rate? 

4. Calculate the cash price of the following bond, sold on September 21: par = $1,000; coupon rate = 5 percent, paid on January 1 and July 1; quoted price = $950. (Round answer to 2 decimal places, e.g. 1564.25.)

5. When are the coupon rate of a bond and the market rate of interest most likely to be the same?

- When the bond matures.

- When the bond is issued.

- The coupon rate changes over the life of a bond to keep it in line with the market rate of interest.

- Never, corporations issuing bonds must always give a premium in coupon rates over the market rate of interest.

6. Which of the following statements is TRUE?

- The quoted price of a bond is the actual price an investor pays for the bond whenever the bond is sold at a date other than the date of a coupon payment.

- The quoted price of a bond is the actual price an investor pays for the bond when the bond is sold on the date of a coupon payment.

- A bond purchaser must pay the bond seller the cash price plus the accrued interest on the bond.

- The cash price plus the accrued interest on the bond is the quoted price of the bond.

7. Alysha has to choose between two investments that have the same cost today. Both investments will ultimately pay $1,280 but at different times, as shown in the table below. If Alysha does not choose one of these investments, she could leave the funds in a bank account paying 3 percent per year.

Which investment should Alysha choose? (Round answer to 2 decimal places, e.g. 125.12. Do not round your intermediate calculations.)

Year Investment A Investment B

1 $0 $190

2 $550 $384

3 $730 $706

Present value of Investment A$

Present value of Investment B$

Alysha would prefer which investment?