Question

1. You bought a stock ten years ago for $90. The stock paid $8 in dividends each year you held it. What is your realized rate of return if you sold it today for $75?   Round your final answer to 4 decimals.

2. Michaels Inc. preferred stock sells for $22 and has a 16% required rate of return. Find the dividend Michaels pays to its preferred shareholders. Round intermediate steps to four decimals and your final answer to two decimals.

3. Johnson common stock is currently selling for $25. The stock recently paid a dividend of $1.5. Investors require a 10% rate of return. Find the dividend growth rate. Round intermediate steps and your final answer to four decimals.

4. Franklin common stock recently paid a $3 dividend, which is expected to grow at a 7% rate indefinitely. Investors require a 12% rate of return.

5. Fisher common stock is expected to pay a $2.25 dividend next year. Dividends are expected to grow at a 5 percent rate forever. The stock currently sells for $26, and your required rate of return is 14 percent, should you purchase the stock?

6. Jones bonds have four years left to maturity pays and carry an 8% coupon rate. The required rate of return is 4%. Find Macaulay's duration. Round intermediate steps to four decimals.

7. What is the duration of a two-year bond that pays an annual coupon of 12 percent and has a current yield to maturity of 14 percent? Round your answer to four decimal places.

8. What would be the percentage change in the value of the bond mentioned in the previous question if interest rates increase by 75 basis points? Round intermediate steps and your final answer to four decimals

9. What is the duration of a three-year Treasury bond with a 5.5 percent coupon selling at par?

Answer 1

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