Question

1.

Given the following information, what is the
**percentage** dividend yield between today and period
1?

Today’s Dividend = |
$3.69 |

Expected Growth rate in dividends = |
5.24 |

Discount Rate (Required return) = |
8.24 |

Calculate your answer to two decimal places (e.g., 2.51)

2.

Given the following information, what is the stock price
**in period 2?**

Today’s Dividend = |
$4.45 |

Expected Growth rate in dividends = |
4.51 |

Discount Rate (Required return) = |
9.73 |

Calculate your answer to the nearest penny (e.g., 2.51)

3.

Given the following information, what is the stock price
**in period 1**?

Today’s Dividend = |
$3.21 |

Expected Growth rate in dividends = |
3.06 |

Discount Rate (Required return) = |
6.85 |

Calculate your answer to the nearest penny (e.g., 2.51)

4.

What is the price of a bond with the following features?

- Face Value = $1,000
- Coupon Rate = 2% (stated as an ANNUAL rate)
**Semiannual**coupon payments- Maturity = 9 years
- YTM = 6.71% (Stated as an APR

5.

Bond A has the following features:

Face value = $1,000,

Coupon Rate = 3%,

Maturity = 9 years, Yearly coupons

The market interest rate is 6.56%

What is the current yield for bond A from today to year 1?

Calculate your answer to 2 decimal places (e.g., 5.23)

6.

Bond A has the following features:

Face value = $1,000,

Coupon Rate = 4%,

Maturity = 9 years, Yearly coupons

The market interest rate is 7.62%

If interest rates remain at 7.62%, what is the percentage capital gain or loss on bond A if you sell the bond in year 1?

State your answer to 2 decimal places (e.g., 3.56, 0.29)

If there is a capital loss make sure to include a negative sign in your answer (e.g., -0.23)

7.

Assume you buy a bond with the following features

Bond maturity = 4

Coupon Rate = 4%

Face Value = $1,000

Annual Coupons

When you buy the bond the market interest rate = 3.33%

Immediately after you buy the bond the interest rate changes to
5.03%

What is the "reinvestment" effect in year 3 ?

8.

Given the following information, what is the dividend yield between period 1 and period 2?

Today’s Dividend = |
$2.48 |

Expected Growth rate in dividends = |
4.31 |

Discount Rate (Required return) = |
9.05 |

Calculate your answer to the nearest penny (e.g., 2.51)

9.

You own a bond with the following features:

Face value of $1000,

Coupon rate of 3% (annual)

15 years to maturity.

The bond is callable after 3 years with the call price of $1,052.

If the market interest rate is 4.89% in 3 years when the bond can be called, if the firm calls the bond, how much will it save or lose by calling the bond?

State your answer to the nearest penny (e.g., 84.25)

If there would be a loss, state your answer as a negative (e.g., -37.51)

Answer #1

1. Using the Dividend discount model,

P = (3.69 * ( 1+ 5.24%) ) / (8.24% - 5.24%) = 129.45

Price at period 1 (P1) = Dividend at period 2 / (r -g) = (3.69 * (1+5.24%)^2 ) /(8.24 %- 5.24%) = 136.23

Dividend yield is calculated using Dividend in trailing twelve month upon current stock price.

Dividend yield = Dividend at period 1 / price at period 1 =
(3.69 * 1.0524 )/ 136.23= **2.85%**

Given the information in the table, what is the dividend yield
from t=0 to t=1?
Today’s Dividend
$3.17
Discount Rate
7.25%
Growth rate in dividends 0 to 1
6.14%
Growth rate in dividends 1 to 2
7.19%
Growth rate in dividends 2 to 3
8.44%
Growth rate in dividends 3 onward
4.05%
Bond A has the following features:
Face value =
$1,000,
Coupon Rate = 4%,
Maturity = 10 years, Yearly coupons
The market
interest rate is 4.74%...

1.
What is the price of a bond with the following features?
Face Value = $1,000
Coupon Rate = 7% (stated as an ANNUAL rate)
Semiannual coupon payments
Maturity = 7 years
YTM = 6.34% (Stated as an APR)
State your answer to the nearest penny (e.g., 984.25)
2.
Assume you buy a bond with the following features
Bond maturity = 4
Coupon Rate = 5%
Face Value = $1,000
Annual Coupons
When you buy the bond the market interest rate...

1) Bond A has the following features: Face value =
$1,000, Coupon Rate = 6%, Maturity = 10 years, Yearly coupons The market
interest rate is 7.20%If interest rates remain at 7.20%, what is the percentage
capital gain or loss on bond A if you sell the bond in year 1?State your answer to 2 decimal places (e.g., 3.56, 0.29)If there is a capital loss make sure to include a negative sign
in your answer (e.g., -0.23)2) Bond E has the following...

1.What is the price of a bond with the following features?
Face Value = $1,000
Coupon Rate = 7% (stated as an ANNUAL rate)
Semiannual coupon payments
Maturity = 7 years
YTM = 6.34% (Stated as an APR)
State your answer to the nearest penny (e.g., 984.25)
2.
You own a bond with the following features:
Face value of $1000,
Coupon rate of 4% (annual)
11 years to maturity.
The bond is callable after 7 years with...

A.
You own a bond with the following features:
Face value of $1000, Coupon rate of 5% (annual) 8 years to
maturity. The bond is callable after 4 years with the call price of
$1,058.
If the market interest rate is 4.17% in 4 years when the bond
can be called, if the firm calls the bond, how much will it save or
lose by calling the bond? State your answer to the nearest penny
(e.g., 84.25). If there...

A.
You own a bond with the following features:
Face value of $1000,
Coupon rate of 5% (annual)
11 years to maturity.
The bond is callable after 6 years with the call price of
$1,056.
If the market interest rate is 4.71% in 6 years when the bond
can be called, if the firm calls the bond, how much will it save or
lose by calling the bond?
State your answer to the nearest penny (e.g., 84.25)...

What is the price of a bond with the following features? Face
Value = $1,000 Coupon Rate = 4% (stated as an ANNUAL rate)
Semiannual coupon payments Maturity = 5 years YTM = 4.48% (Stated
as an APR) State your answer to the nearest penny (e.g.,
984.25)

What is the price of a
bond with the following features?
Face Value = $1,000
Coupon Rate = 2% (stated as an ANNUAL rate)
Semiannual coupon payments
Maturity = 5 years
YTM = 4.8% (Stated as an APR)
State your answer to
the nearest penny (e.g., 984.25)

What is the price of a bond with the following features?
Face Value = $1,000
Coupon Rate = 5% (stated as an ANNUAL rate)
Semiannual coupon
payments
Maturity = 9 years
YTM = 4.17% (Stated as an APR)
State your answer to the nearest penny (e.g., 984.25)

What is the price of a bond with the following features? Face
Value = $1,000 Coupon Rate = 7% (stated as an ANNUAL rate)
Semiannual coupon payments Maturity = 7 years YTM = 4.43% (Stated
as an APR) State your answer to the nearest penny (e.g.,
984.25)

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