Sheet11. Bonds issued by VIX Industries have a par value of
$1,000. The bonds are currently selling for $885.50. They have 10
years remaining to maturity.The coupon rate is 8% and the coupon
payment is paid semiannually. What is the bonds yield to
maturity?
2. WMT Enterprise has bonds with face value of $1,000 on the
market making annual payments, with 10 years to maturity, and
selling for $1,146.80. At this price, the bonds yield 6%. What must
the coupon rate be on WMTs bonds?
3. A MU Industries bond has a 10% coupon rate and a $1,000 face
value. Interest is paid semiannually, and the bond has 15 years to
maturity.If investors require a 8% yield, what is the bonds
value?
4. ABC Co. has just paid a cash dividend of $2.1 per share.
Investors require a 16% return from investments such as this.If the
dividend is expected to grow at a steady 9% per year, what is the
current value of the stock? What will the stock be worth in five
years?
5. XYZ Corporation will pay a $4.5 per share dividend next year.
The company pledges to increase its dividend by 4% per year,
indefinitely.If you require a 10% return on your investment, how
much will you pay for the company stock today?
6. Suppose we observe a stock selling for $40 per share. The
next dividend will be $1 per share, and you think the dividend will
grow at 12% per year forever. What is the dividend yield in this
case? The capital gains yield? The total required return?
7. TXN, Inc., has an issue of preferred stock outstanding that
pays a $6.3 dividend every year, in perpetuity. If this issue
currently sells for $78.86 per share, what is the required
return?
8. BGN, Inc. just paid a dividend of $4. The dividend is
expected to grow at a 30% rate for the next 3 years and at a 10%
rate thereafter. What is the value of the stock if the required
rate of return is 20%?
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