1) Bartiromo, Inc. bonds have a 6% coupon rate with semi-annual coupon payments

Question

1) Bartiromo, Inc. bonds have a 6% coupon rate with semi-annual coupon payments and a $1,000 par value. The bonds have 14 years until maturity, and sell for $950. What is the current yield for Bartiromo's bonds?
a) 3.28%
b) 6.32%
c) 6.55%
d) 7.52%

2) The market price of a firm's common stock equals the sum of all equity accounts as reported in its balance sheet (common stock + paid-in capital + retained earnings) divided by the number of shares outstanding.
a) True
b) False

3) The PDQ Company's common stock is expected to pay a $1.00 dividend in the coming year. If investors require a 15% return and the growth rate in dividends is expected to be 5%, what will the market price of the stock be?
a) $5.00
b) $10.00
c) $15.00
d) $20.00

Explanation / Answer

1. Current Yield = Annual payments/Current value of bond

Current Yield = $60/$950 = 6.32%

2. False

3. P0 = D1/(r-g)

P0 = $1/(.15 - .05) = $10

Related Questions

Navigate

• Browse (All)
• Browse 1
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.