1. Kevin purchases 100 shares of Coca- Cola at $42.40 a share in January. The co
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Question
1. Kevin purchases 100 shares of Coca- Cola at $42.40 a share in January. The company paid a dividend of .25 per share and he sells the stock after a year for $43.00 a share. Calculate Kevin's return.
2. A technology company has total liabilities of $60,000 and stock holders' equity of $200,000. If the company has 7,000 shares of common stock outstanding, what is its book value?
3. Filter Filler has outstanding bonds with a par value of $1000 and a coupon rate of 5% that mature in 15 years. If the market price of a Filter Filler bond is $865, what is the current yield on the bond.
Explanation / Answer
1. Kevin's return = (final stock price - initial stock price + dividend)/initial stock price
=(43-42.40+0.25)/42.40
=2.00%
---------
Book Value per share = $200000/7000
=$28.57 per share
------
Current yield = Annual interest payment / Current Bond Price
=50/865
=5.78%
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