3.Kennedy bought 15,000 shares of Duke Power series B $100 preferred stock that

Question

3.Kennedy bought 15,000 shares of Duke Power series B $100 preferred stock that pays a $5 annual dividend for $1,478,500. What is Kennedy's annual yield on this investment?

5.The city of Omaha issued $5,000,000 of 30 year, 5% tax free bonds to update the city's water system. The city received $5,132,800 for the bonds on the date of issuance. What was the issuance price of the bonds?

6.Marco paid $975 for a $1,000, 3% bond with semiannual coupon payments that matures in 5 years. What is Marco's yield to maturity on this investment?

7.A large regional airport is planning to issue $15,000,000 of 15 year, 4% bonds that will pay annually. The proceeds will be used to update runways, taxiways and the ground transportation system. Market analysis indicates the bonds will sell to yield 4.25%. What amount of cash proceeds should the airport plan on receiving from the bond issuance?

8.A project has an initial cost of $8,600 and produces cash inflows of $3,200, $4,900, and $1,500 over the next three years, respectively. What is the discounted payback period if the required rate of return is 8%?

Explanation / Answer

answer no 3 no of share 14785 Dividend per share 73925 Annual Yield on investment 0.05 5.00% answer no 5 bond value 5000000 proceeds from bond issue 5132800 Issue price of bond 1.02656 if bond face value is 1 then it is issued with a premium of .02 i.e. 1.02 per bond answer no 6 approximate YTM interest + (redemption value- market price)/no of years to maturity   / (redemption value+ market price)/2 65 987.5 0.065823 6.582278 percent answer no 8 year cash inflow present value @8% present value of cash inflow 0 -8600 cumulative cash flow 1 3200 0.925926 2962.963 2962.963 2 4900 0.857339 4200.96 7163.923 3 1500 0.793832 1190.748 -1436.08 amount to be recovered in year 3 shortage of cash inflow -245.328 as this project is not able to generate enough cash so that whole investment is recovered discounted pay back period will be more than 3 years or we can not calculate it answer no 7 Year cash flow present value at 4.25% present value of cash flow 1 600000 0.959233 575539.6 2 600000 0.920127 552076.3 3 600000 0.882616 529569.6 4 600000 0.846634 507980.4 5 600000 0.812119 487271.4 6 600000 0.779011 467406.6 7 600000 0.747253 448351.7 8 600000 0.716789 430073.6 9 600000 0.687568 412540.6 10 600000 0.659537 395722.4 11 600000 0.63265 379589.8 12 600000 0.606858 364114.9 13 600000 0.582118 349270.9 14 600000 0.558387 335032.1 15 600000 0.535623 321373.7 15 15000000 0.513787 7706803 cash receipts from issuance of bonds 14262716

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