One year ago Lerner and Luckmann Co. issued 15-year,
noncallable, 10% annual coupon bonds at their par value of $1,000.
Today, the market interest rate on these bonds is 5.5%. What is the
current price of the bonds, given that they now have 14 years to
maturity?
Select the correct answer.
Rogoff Co.'s 15-year bonds have an annual coupon rate of 9.5%.
Each bond has face value of $1,000 and makes semiannual interest
payments. If you require an 11% nominal yield to maturity on this
investment, what is the maximum price you should be willing to pay
for the bond?
Select the correct answer.
Rogoff Co.'s 15-year bonds have an annual coupon rate of 9.5%.
Each bond has face value of $1,000 and makes semiannual interest
payments. If you require an 11% nominal yield to maturity on this
investment, what is the maximum price you should be willing to pay
for the bond?
Select the correct answer.
A 25-year, $1,000 par value bond has an 8.5% annual coupon. The
bond currently sells for $1,025. If the yield to maturity remains
at its current rate, what will the price be 5 years from now?
Select the correct answer.
5-year Treasury bonds yield 3.7%. The inflation premium (IP) is
1.9%, and the maturity risk premium (MRP) on 5-year bonds is 0.4%.
What is the real risk-free rate, r*?
Select the correct answer.
A stock is expected to pay a dividend of $0.75 at the end of the
year. The required rate of return is rs = 10.5%, and the
expected constant growth rate is g = 5.5%. What is the stock's
current price?
Select the correct answer.
A stock just paid a dividend of D0 = $1.50. The
required rate of return is rs = 11.0%, and the constant
growth rate is g = 4.0%. What is the current stock price?
Select the correct answer.
$31.00 per share is the current price for Foster Farms' stock.
The dividend is projected to increase at a constant rate of 5.50%
per year. The required rate of return on the stock, rs,
is 9.00%. What is the stock's expected price 3 years from
today?
Select the correct answer.
Orwell building supplies' last dividend was $1.75. Its dividend
growth rate is expected to be constant at 37.00% for 2 years, after
which dividends are expected to grow at a rate of 6% forever. Its
required return (rs) is 12%. What is the best estimate
of the current stock price?
Select the correct answer.
Carby Hardware has an outstanding issue of perpetual preferred
stock with an annual dividend of $8.60 per share. If the required
return on this preferred stock is 6.5%, at what price should the
preferred stock sell?
Select the correct answer.
