Stocks 1. Stock. What is the value of a stock with a a. $2.50 dividend just paid

Question

Stocks 1.   Stock. What is the value of a stock with a a. $2.50 dividend just paid and an 8% required return with 0%   growth? b. $3 dividend just paid and a 8% required return with 2%   growth? c. $7 dividend to be paid and a 10% required return with 2%   growth? 2.   Stock. What is the required rate of return on a stock with a a. $2.50 expected dividend and a $19 price with 6% growth? b. $2.75 expected dividend and a $20 price with 8% growth? c. $2.50 expected dividend and a $19 price with 9% growth? 3.   Stock. What is the growth rate of the stock with a a. $3.00 expected dividend and a $20.60 price with 15% required   return? b. $2.40 expected dividend and a $25.35 price with 10% required   return? c. $2 expected dividend and a $8.30 price with 11% required   return? Bonds 1. Bond.   What is the value of a $1,000 par value bond with annual payments of an a. 10%   coupon with a maturity of 10 years and a 15% required return? b. 8%   coupon with a maturity of 10 years and a 8% required return? c. 11%   semiannual coupon with a maturity of 20 years and a 11% required return? d. 8%   semiannual coupon with a maturity of 20 years and a 9% required return? 2.   Bond. What is the yield to maturity of a $1000 par value bond with an a. 10%   annual coupon and 10 years to maturity and a $1,000 price? b. 9.5%   annual coupon and 20 years to maturity and a $788 price? c. 5.0%   annual coupon and 8 years to maturity and a $800 price? Stocks 1.   Stock. What is the value of a stock with a a. $2.50 dividend just paid and an 8% required return with 0%   growth? b. $3 dividend just paid and a 8% required return with 2%   growth? c. $7 dividend to be paid and a 10% required return with 2%   growth? 2.   Stock. What is the required rate of return on a stock with a a. $2.50 expected dividend and a $19 price with 6% growth? b. $2.75 expected dividend and a $20 price with 8% growth? c. $2.50 expected dividend and a $19 price with 9% growth? 3.   Stock. What is the growth rate of the stock with a a. $3.00 expected dividend and a $20.60 price with 15% required   return? b. $2.40 expected dividend and a $25.35 price with 10% required   return? c. $2 expected dividend and a $8.30 price with 11% required   return? Bonds 1. Bond.   What is the value of a $1,000 par value bond with annual payments of an a. 10%   coupon with a maturity of 10 years and a 15% required return? b. 8%   coupon with a maturity of 10 years and a 8% required return? c. 11%   semiannual coupon with a maturity of 20 years and a 11% required return? d. 8%   semiannual coupon with a maturity of 20 years and a 9% required return? 2.   Bond. What is the yield to maturity of a $1000 par value bond with an a. 10%   annual coupon and 10 years to maturity and a $1,000 price? b. 9.5%   annual coupon and 20 years to maturity and a $788 price? c. 5.0%   annual coupon and 8 years to maturity and a $800 price?

Explanation / Answer

BOND SOLUTIONS

1. Bond. What is the value of a $1,000 par value bond with annual payments of an 1. a. 10% coupon with a maturity of 10 years and a 15% required return? a. RATE 15%   (This is the yield to maturity or required rate of return.) NPER 10   (This is the number of years to maturity.) PMT ($100.00)   (This is the annual coupon interest payment.) FV ($1,000.00)   (This is the par or face value of the bond.) TYPE PV $749.06   (This is the current selling price of the bond.)   (I used Excel's PV() function. Select cell c8 to view formula used.) b. 8% coupon with a maturity of 10 years and a 8% required return? b. RATE 8%   (This is the yield to maturity or required rate of return.) NPER 10   (This is the number of years to maturity.) PMT ($80.00)   (This is the annual coupon interest payment.) FV ($1,000.00)   (This is the par or face value of the bond.) TYPE PV $1,000.00   (This is the current selling price of the bond.)   (I used Excel's PV() function. Select cell c17 to view formula used.) c. 11% semiannual coupon with a maturity of 20 years and a 11% required return? c. RATE 5.50%   (This is the semi-annual yield to maturity or required rate of return.) NPER 40   (This is the number of semi-annual periods to maturity.) PMT ($55.00)   (This is the semi-annual coupon interest payment.) FV ($1,000.00)   (This is the par or face value of the bond.) TYPE PV $1,000.00   (This is the current selling price of the bond.)   (I used Excel's PV() function. Select cell c26 to view formula used.) d. 8% semiannual coupon with a maturity of 20 years and a 9% required return? d. RATE 4.50%   (This is the semi-annual yield to maturity or required rate of return.) NPER 40   (This is the number of semi-annual periods to maturity.) PMT ($40.00)   (This is the semi-annual coupon interest payment.) FV ($1,000.00)   (This is the par or face value of the bond.) TYPE PV $907.99   (This is the current selling price of the bond.)   (I used Excel's PV() function. Select cell c35 to view formula used.) 2. Bond. What is the yield to maturity of a $1000 par value bond with an 2. a. 10% annual coupon and 10 years to maturity and a $1,000 price? a. NPER 10   (This is the number of years to maturity.) PMT ($100.00)   (This is the annual coupon interest payment.) PV $1,000.00   (This is the current selling price.) FV ($1,000.00)   (This is the face value of the bond.) TYPE GUESS RATE 10.00%   (This is the annual yield to maturity or required rate of return.)   (I used Excel's RATE() function. Select cell c46 to view formula used.) b. 9.5% annual coupon and 20 years to maturity and a $788 price? b. NPER 20   (This is the number of years to maturity.) PMT ($95.00)   (This is the annual coupon interest payment.) PV $788.00   (This is the current selling price.) FV ($1,000.00)   (This is the face value of the bond.) TYPE GUESS 10%   (Input any interest here if cell c57 is returning error message.) RATE 12.41%   (This is the annual yield to maturity or required rate of return.)   (I used Excel's RATE() function. Select cell c56 to view formula used.) c. 5.0% annual coupon and 8 years to maturity and a $800 price? c. NPER 8   (This is the number of years to maturity.) PMT ($50.00)   (This is the annual coupon interest payment.) PV $800.00   (This is the current selling price.) FV ($1,000.00)   (This is the face value of the bond.) TYPE GUESS RATE 8.55%   (This is the annual yield to maturity or required rate of return.)   (I used Excel's RATE() function. Select cell c66 to view formula used.)

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