Question

**MCQ 10-16 If a bond's value rises above its par value
during...**

If a bond's value rises above its par value during its life, interest rates have:

Multiple Choice

- gone up
- gone down
- stayed the same
- there is no correlation with interest rates

**Problem 10-29**

The Fleming Corporation paid a dividend of $0.45 last year. Over
the next 12 months, the dividend is expected to grow at 13 percent,
which is the constant growth rate for the firm. The new dividend
after 12 months will represent *D _{1}*. The required
rate of return is 18 percent.

Compute the price of a common share. **(Round the final
answer to 2 decimal places.)**

Common share price ______ $

**Problem 10-34**

Triple Peaks Playhouse will pay a quarterly dividend of $0.50 at the end of the next quarter. It has common share price of $40.00 and a constant growth rate of 4 percent.

Compute the required rate of return. **(Round the final
answer to 2 decimal places.)**

Required rate of return _______ %

Answer #1

**10 - 16)**

**The relation between bond price and it's interest rate
is inverse. i.e., when price increases interest decreases and
vice-versa**

**so answer is Gone
down**

**10 - 29)**

share price = D1 / Ke - growth

where Ke = required return

D1 = 0.45*(1+13%) = 0.5085

Share price = 0.5085 / (18% - 13%)

= **$10.17**

**10 - 34)**

Quarterly dividend = 0.50

annual dividend = 0.50*4 = 2

Ke =( D1 / P0 ) + g

Ke = (2 / 40) + 4%

Ke = **9%**

(NOTE : here it is assumed that dividend paid for remaining three quarters,and the given growth rate is annual.otherwise answer would be different)

Problem 10-29
The Fleming Corporation paid a dividend of $0.45 last year. Over
the next 12 months, the dividend is expected to grow at 13 percent,
which is the constant growth rate for the firm. The new dividend
after 12 months will represent D1. The
required rate of return is 18 percent.
Compute the price of a common share. (Round the final
answer to 2 decimal places.)
Common share price ______ $
Problem 10-34
Triple Peaks Playhouse will pay a...

Friedman Steel Company will pay a dividend of $7.10 per share in
the next 12 months (D1). The required rate of
return (Ke) is 18 percent and the constant
growth rate is 8 percent. (Each question
is independent of the others. Round the final answers to 2 decimal
places.)
a. Compute P0.
Price of common share
$
b. Assume Ke, the required
rate of return, goes up to 21 percent, what will be the new value
of P0? ...

A bond's market price is $925. It has a $1,000 par value, will
mature in 10 years, and has a coupon interest rate of 9 percent
annual interest, but makes its interest payments semiannually. What
is the bind's yield to maturity? What happens to the bond's yield
to maturity if the bond matures in 20 years? What if it matures in
5 years?
The bond's yield to maturity if it matures in 10 years is ___%
(round to two decimal...

Fingen's 16-year, $1,000 par value bonds pay 13 percent
interest annually. The market price of the bonds is $1,140 and
the market's required yield to maturity on a comparable-risk bond
is 10 percent. a. Compute the bond's yield to maturity.
b. Determine the value of the bond to you, given your required
rate of return. c. Should you purchase the bond?

You own a 10-year, $1000 par value bond paying 8percent
interest annually. The market price of the bond is $925, and your
required rate of return is 11 percent.
a. Compute the bond's expected rate of return.
b. Determine the value of the bond to you, given your required
rate of return.
c. Should you sell the bond or continue to own it?

There is a corporate bond with 5-year maturity. Its par value is
$1000. Its coupon is paid semiannually with $5 each time. And the
stock price of this firm is $50 per share now. The share
outstanding is 20,000 shares. Suppose this firm keeps paying
dividend annually. And the dividend is growing each year. And
shareholders got $2 as the dividend per share for this year.
The firm Return of Equity is 0.06. Its Plowback Ratio is 0.4. The
inflation...

having the following information:- A $100.0 par value preferred
stock with 10.0% dividend & a 15.0% required return. A $1.0 par
value common stock with $3.0 EPS; a 5.0% risk-free rate; a 6.0%
Market Risk-Premium; a 40.0% pay-out ratio; a 5.0% constant growth
in EPS & dividend per share (g). A 20 years 6.0% coupon
debenture (Non-guaranteed corporate bond) with a Yield-to-maturity
(YTM) of 5.0%. Answer the following questions:-
1 - The preferred stock's price is ???
2 - The...

Q4. FYI bonds have a par value of $1,000. The bonds pay $40 in
interest every six months and will mature in 10 years.
a. Calculate the price if the yield to maturity on the bonds is
7, 8, and 9 percent, respectively.
b. Explain the impact on price if the required rate of return
decreases.
c. Compute the coupon rate on the bonds. How does
the relationship between the coupon rate and the yield to maturity
determine how a...

You own a 15-year, $ 1,000 par value bond paying 7.5 percent
interest annually. The market price of the bond is $ 900, and
your required rate of return is 10 percent. a. Compute the bond's
expected rate of return. b. Determine the value of the bond to
you, given your required rate of return. c. Should you sell the
bond or continue to own it? a. What is the expected rate of return
of the 15-year, $ 1,000 par...

1. A bond's par value can also be called its
coupon payment.
present value.
market value.
face value.
2.Horizon offers a 12 percent coupon bond with semiannual
payments and a yield to maturity of 10 percent. The bonds mature in
16 years. What is the market price per bond if the face value is
$1,000?
$808
$911
$1,000
$1,158

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