Please answer 1-6 or none of them at all. 1.A bond has a face value of 10,000. T

Question

Please answer 1-6 or none of them at all.

1.A bond has a face value of 10,000. The bond matures in 12 years and pays its coupon interest semi-annually. The coupon rate is 9%. Assuming a yield of 8%, what is the price of the bond?

2. Zap Power Company pays an annual dividend on its preferred stock of $4.54 per share. The investors have an 8% required rate of return. What is the price of the stock?

3. What is the price of the following common stock? Dividend $2.42, growth rate is 4%, and required rate of return is 11%.

4. No Crash Airlines has an annual dividend of 1.17 per share. The company expects 5% annual growth. Investors require a 12% return from this stock. What is its current price?

5. A bond has a par value of 1,000. The bond matures in 17 years. Assume semi-annual payments. For a coupon rate of 9% and a yield of 11%, what is the current price?

6. A semi-annual bond has a maturity date of 20 years from now. Assuming a face value of 1,000, a coupon rate of 7%, and a yield of 9%, what is the bond's price?

Explanation / Answer

Part 1

FV = 10,000

N or Semi Annual periods = 12 * 2 = 24

Coupon Rate = 9%

Semi Annual Coupon Rate = 4.5%

Semi Annual COupon Payment = 450

Yield = 8%

Semi Annual Yield = 4%

USing Financial Calculator:

PV = 10,762.35

Part 2

Dividend = 4.54

Required Return = 8%

Price of preferred stock = 4.54/ 8%

Price of preferred stock = 56.75

Part 3

Dividend = 2.42

Growth Rate = 4%

Required Rate = 11%

Price = 2.42 * (1.04)/ (11% - 4%)

Price = 35.95

Part 4

Dividend = 1.17

Growth Rate = 5%

Required Rate = 12%

Price = 1.17 * (1.05)/ (12% - 5%)

Price = 17.55

Part 5

FV = 1000

N or Semi Annual periods = 17 * 2 = 34

Coupon Rate = 9%

Semi Annual Coupon Rate = 4.5%

Semi Annual Coupon Payment = 45

Yield = 11%

Semi Annual Rate = 5.5%

Using Financial Calculator:

PV = 847.63

Part 6

FV = 1000

N or Semi Annual periods = 20 * 2 = 40

Coupon Rate = 7%

Semi Annual Coupon Rate = 3.5%

Semi Annual Coupon Payment = 35

Yield = 9%

Semi Annual Rate = 4.5%

Using Financial Calculator:

PV = 815.98

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