Question

You bought a bond one year ago for $1,070.85. This bond pays a semi-annual coupon at the rate of 8.4% and matures 19 years from today. What is the percentage change in price from last year until today if interest rate have fallen and a fair yield for this bond is now 7.2%?

(a) + 10.34% (b) +   4.89% (c) - 17.16% (d) +   4.66% (e) -    4.66%

15. What is the yield-to-maturity (YTM) of a Caesar’s corporate bond that is selling for $1,066.23 today, is paying an annual coupon of 15% (the next coupon payment is one year from today), and matures in 20 years?

(a) 17.0% (b) 16.0% (c) 15.0% (d) 14.0% (e) 13.0%

16. MGM Resorts Incorporated is expected to grow at an exceptionally high rate over the next 2 years due to the success of Macau casino. Growth in dividends is expected to be 20% for the next 2 years before reverted back to a constant rate of 4% that is expected to continue indefinitely. If MGM Resorts’ paid a $1.20 dividend yesterday (D0=$1.20) and the stock is valued according to a required rate of return of 14%, what is the value of a share of MGM Resorts stock today?

(a) $14.72 (b) $16.42 (c) $17.97 (d) $20.56 (e) $19.88

17. Your stockbroker tells you the beta on Apple Corp is 1.50, a U.S. Treasury pays 3%, the S&P500 is expected to return 9.0% over the next year, and an Apple bond has a YTM of 8.0%.   You know that Apple is planning to pay a $10.60 dividend per share over the next year (D1 = $10.60). Based on this information, and an expected constant growth rate of 10%, for what do you think a share of Apple should sell?

(a) $ 151.43 (b) $ 176.67 (c) $1,060.00 (d) $ 530.00 (e) $ 353.33

Answer 1