Giant Aluminum Corporation will pay dividends of $4.75, $5.25, $5.75, and $7.00

Question

Giant Aluminum Corporation will pay dividends of $4.75, $5.25, $5.75, and $7.00 for the next four years. Thereafter, the company expects the dividend growth rate to be a constant 7 percent. if the required rate of return in 15 percent, what is the current price of the stock?

$57.54

$69.41

$80.29

$93.63

Junkman's Warehouse and Storage Company has a bond outstanding with a face value of $1,000, an annual coupon payment of 5.5 percent, and 10 years until maturity. The current yield to maturity is 10 percent. How much profit would an investor make by buying the bond today and selling it in exactly one year if the yield to maturity one year from now is 4 percent?

$57.54

$69.41

$80.29

$93.63

Junkman's Warehouse and Storage Company has a bond outstanding with a face value of $1,000, an annual coupon payment of 5.5 percent, and 10 years until maturity. The current yield to maturity is 10 percent. How much profit would an investor make by buying the bond today and selling it in exactly one year if the yield to maturity one year from now is 4 percent?

Explanation / Answer

Now 1 year from now FV 1000 FV 1000 Annual coupon 5.50% Annual coupon 5.50% N 10 N 9 YTM 10% YTM 4% PV of all coupons $337.95 PV of all coupons 408.94 PV of $1000 $385.55 PV of $1000 702.59 PV of bond $723.50 PV of bond 1111.53 Profit $388.03

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